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COPYRIGHT DEPOSIT. 



WQRKS BY DAVID C. REID 



Effective Industrial Reform 

Orders for this book have been received from 
cities as far distant as St. Petersburgh, Russia. 

It gives a careful analysis of the origin and 
character of the evils of our present industrial 
system, points out the remedy and outlines the 
next step in our industrial evolution. 

Price, $1.40 Postpaid 



Capital and Profits 

Contains the discussion of a particular topic 
which is of vital importance to the solution of 
the problem of economic justice and industrial 
reconstruction. 

Price, $1.40 Postpaid 



THE HAZARD COMPANY 
SPRINGFIELD, MASS. 



CAPITAL AND PROFITS 



By 

DAVID C. REID 

Author of "Effective Industrial Reform 



THE HAZARD COMPANY 
SPRINGFIELD, MASS. 



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Copyright, 1914 
By David C. Reid 



All rights reserved 
Published April, 1914 



JUN..-5 1914 

©CI.A376174 



Contents 

PAGE 

Introduction 5 

PART I. Statement of the Problem— Definition 
of Capital. 

Chapter I. Capital and Profits— The Two Views . 9 

Chapter II. What is Capital? 22 

PART II. The Productivity of Capital— Rents, 
Interest, and Dividends. 

Chapter III. The Productivity of Capital 37 

Chapter IV. Legitimacy of Rents, Interest, and 

Dividends 47 

PART III. The Practical Bearings of the Subject. 

Chapter V. The Worker's Two Sources of Income. 63 

Chapter VI. The Principle Determining the Earn- 
ings of Capital and Labor 75 

Chapter VII. The Practical Utility of Capital and 

Dividends 85 

Chapter VIII. The True Economic Basis of Life 94 

PART IV. Effect of the Marxist Economics— Pen- 
sions — the True Cause of Industrial 
Wrongs. 

Chapter IX. The Actual Effects of the Marxist 

Economics, if Once Introduced Ill 

Chapter X. Are Pensions an Adequate Substitute 

for Dividends? 120 

Chapter XI. Is the Profit System the Cause of 

Present Industrial Wrongs? 131 



4 Contents 

PART V. The Right Concrete Plan or the Next 
Step in Our Industrial Evolution. 

page 

Chapter XII. The Right Concrete Plan— Funda- 
mental Principles 161 

Chapter XIII. The Right Concrete Plan— Funda- 
mental Demands 173 

Chapter XIV. Will This Plan Work? Is It Practi- 
cable? 192 

Chapter XV. How to Introduce This Plan 210 

Index 217 



Introduction 

T^EW subjects today demand our more careful 
A study than capital and profits. For no method 
of industrial reconstruction can succeed which fails 
to give to capital and profits their true place and 
function. Civilization itself will stand or fall ac- 
cording to the view which we take of this important 
factor. And yet not only have most people today 
very hazy ideas of the nature, function and neces- 
sity of capital and profits, but it is in relation to 
this factor that the most fatal errors in all pro- 
posals of industrial reconstruction are made. 

The object of this book is to make plain the true 
function of capital and profits and thereby enable 
the people to reconstruct their industrial system 
and not fall into worse evils than those from which 
they fly. 

This book also distinguishes between the great 
movement called socialism and the economic teach- 
ings of Marx or Marxism, which unfortunately have 
infected the whole socialist party but must not, 
therefore, be regarded as a necessary element of 
true socialism. A sane and enlightened socialism 
is doubtlessly bound to come; but the Marxist 
economics, in the minds of many, is equally bound 
to go. 



PART I 

Statement of the Problem — Definition 
of Capital 



Capital and Profits 

CHAPTER I 

Capital and Profits— The Two Views 

THE time is rapidly approaching when intelli- 
gent men must work out a definite plan of in- 
dustrial reconstruction that will command the sup- 
port of thoughtful minds. For present industrial and 
economic conditions are intolerable and demand a 
change. 

When American history began, the industrial pol- 
icy which our fathers deliberately adopted was that 
of pure industrial individualism and anarchism. 
Each man was thrown upon his own feet and told 
to fight his own battle as best he could. The strug- 
gle for bread was made to be a fierce free-fight-for- 
all in which the best man was expected to come 
out on top.* 

But this policy of individualism and anarchism 
has given birth to a system that is feudalistic and 
despotic. From amidst the strife of individuals and 
groups, a strong financial oligarchy has rapidly 
emerged and risen to power, and today a few strong 
men hold supreme irresponsible control over the 

* For a clear explanation of the origin, development and 
character of our present industrial system, see Reid's Effective 
Industrial Reform, Part I — The Hazard Company. 

9 



10 Capital and Profits 

whole industrial world. And this creates a condi- 
tion of menace and danger which cannot be toler- 
ated by a free and enlightened people. 

The great problem that is confronting all minds, 
therefore, is how to overthrow this huge system of 
oppression and iniquity that has fastened itself 
upon us? What is the new principle which we must 
adopt and what is the concrete plan, the social 
machinery, by which to put that principle into 
actual operation? 

But before this two-fold problem can be solved, 
it is imperative that we obtain a correct view of 
the nature and function of capital and profits and 
their place in our industrial and economic life. 

The capital invested in our country's industries 
is commonly supposed to earn its legitimate income 
as well as labor. The earnings of capital are paid 
in the form of profits, as interest or dividends or 
rents; the earnings of labor, in the form of wages 
or salaries. And men and women who have believed 
in honest work for honest pay, and have had, there- 
fore, no desire to oppress or rob their fellowmen, 
have hitherto saved and invested their savings in 
their country's industries for the express purpose of 
earning an income from them. 

Now the first question which is to be discussed in 
this book is — Are these dividends which are earned 
by invested capital legitimate? Is it right for the 
worker to invest his savings in his country's indus- 
tries and earn an income from them, or have we 
been all along mistaken in this matter and must 
we, for the sake of justice, when we come to recon- 



The Two Views 11 

struct our industrial system, abolish all interest, 
dividends and rents from our economic life? 

2. 

Two distinct and directly antagonistic views are 
held today in relation to this question concerning 
the legitimacy of capital and profits. And there is 
no hope of solving the problem of industrial recon- 
struction until we settle, once for all, which of these 
two antagonistic views is true. 

The first of these views is identified with Karl 
Marx, the father of modern socialism, and, there- 
fore, may be called the Marxist view. It is held 
today practically by the whole socialist party. 
The second is that which is coming to be taught 
substantially in all our schools and colleges today, 
and may be called the modern scientific view. 

The Marxist view, briefly stated, affirms that 
labor produces everything; that capital produces 
nothing; and that, therefore, all profits, including 
rents, interest and dividends, are nothing but the plun- 
der which capital exacts from labor, and, therefore, 
should be abolished. It affirms that this profit- 
taking is the very root of present industrial wrongs; 
and that, therefore, the evils of our present industrial 
system cannot be remedied until we are willing to 
abolish all rents, interest and dividends forever. 
Marxism, therefore, condemns all dividends paid to 
invested capital, all interest paid on money loaned, 
and all income received from the rental of real 
estate, as being sheer robbery. And Marxism is 
ever seeking so to reconstruct our industrial system 



12 Capital and Profits 

that all dividends, interest and rents, however de- 
rived, shall be forevermore impossible. 

How Marx arrived at this conclusion concerning 
capital and profits is easily explained. 

Marx made, it may be said, a great discovery. 
He saw for the first time, in all its clearness, that the 
chief cause of the poverty and degradation of the 
laboring classes lay in the fact that they were 
systematically oppressed and plundered by the capi- 
talist class, which under the plea of profits, robbed 
the worker of the larger part of the product of his 
labor. Marx's whole career consisted in one long 
effort to expose the injustice which modern capital- 
ism commits against labor and to arouse the workers 
for its overthrow. 

This was the grand purpose of his book — Capital — 
which has been justly called the bible of modern 
socialism. This book contains, indeed, the most 
powerful and, in its essential affirmations, the most 
just arraignment of modern capitalism that can be 
conceived. It was, indeed, an epoch-making book. 
It called the attention of the worker and the world, 
for the first time in human history, to the existence 
of an all-powerful system of oppression and plunder, 
which the people had not been aware of before. 
And he made the workers see that, though the modern 
capitalist class had no armies immediately behind 
its back, yet in its control of the economic necessities 
of life, it possessed a power to oppress greater than 
that of the ancient Caesars, and through its control 
of all the wealth and capital of the country it was 
able to control also even governments and armies. 



The Two Views 13 

For this work of exposing capitalist oppression 
and arousing the workers against it, Marx deserves 
all praise. 

But in the intensity of Marx's arraignment of 
modern capitalism, he failed to distinguish between 
what we may call a just and an unjust capitalism, 
and he failed to see the place which a just capitalism 
must occupy in our economic life. To him, capital 
was always the instrument of plunder. To one who 
reads and re-reads his books and abridgments of 
them, he gives the impression on every page that to 
him capital is always predaceous. And the funda- 
mental assumption which underlies every argument 
is, that labor produces everything, that capital 
produces nothing and that, therefore, all profits 
including rents, interest and dividends, are nothing 
but the plunder which capital exacts from labor. 

The position of modern economic science con- 
cerning the nature and function of capital is just the 
opposite of Marx and his disciples. Modern econo- 
mics affirms that capital, though it is the product of 
labor is, nevertheless, itself productive; that it earns 
a real profit or increase, over and above the labor 
employed in its creation and use, and that this 
profit should justly go to the worker whose labor 
created it or justly acquired it. 

In short, modern economic science is coming to 
distinguish between a just and an unjust capitalism. 
It admits that modern capital robs labor; and that 
Marx is right when he says that the tendency of 
capitalism, under the present system,- is to rob the 
worker of his whole surplus earnings, above the bare 



14 Capital and Profits 

cost of his support. Nevertheless, it affirms that 
there is such a thing as a just profit which should 
go to capital. And because a part of the so-called 
earnings of capital is robbery, we must not, there- 
fore, conclude that all is robbery. For capital 
earns a just profit, even as labor earns a just wage. 
Furthermore, economic science affirms that capital 
occupies an essential place in our economic life. 
Whatever, therefore, be the cause of present indus- 
trial wrongs, economic science affirms that that cause 
does not necessarily lie in the mere fact of profit- 
taking. 

3. 

These two views, it can be seen, are directly 
antagonistic to each other. They cannot both be 
true. And they vitally affect the very foundations 
of our industrial and economic life. For the one — 
the modern scientific view — defends, while the other 
seeks to destroy what has been a fundamental 
factor in the economic life of man ever since the world 
began. 

For from the beginning of the world down to the 
present time, men have gone into business and 
invested their savings or capital for an income. 
And this has been one of the chief incentives to 
industry and one of the fundamental factors of 
human progress and civilization. Men have manu- 
factured tools, cultivated land, opened up mines, 
harnessed the forces of water and wind, of steam 
and electricity, and have built boats and sawmills 
and factories; they have laid railroads and built 
up marts of trade. And they have done these things, 



The Two Views 15 

not merely to make labor more productive, but in 
order to earn an income from their invested capital. 

And while it has always been admitted that there 
was such a thing as an unjust profit and that business 
men, owing to the individualistic and competitive 
character of our present business life, have often 
used this profit-taking as a means of robbery, yet 
it has always been assumed that there was such a 
thing as a just profit which is earned by the use of 
capital and that this just profit should go to the 
investor. 

Furthermore, in all ages and in the United States 
today, there are multitudes of men and women 
— workers, teachers, preachers, doctors, lawyers, 
widows and others who, though not engaging 
directly in business themselves, nevertheless, save 
a part of their earnings and invest those savings in 
the industries of the country. And by the earnings 
of these savings, they secure leisure and prepare for 
sickness and old age. And this has been one of the 
essential factors in every thrifty life. Multitudes 
of widows and orphaned children are kept from 
want by the earnings of the invested savings of the 
once living husband and father. 

Down to the present time, therefore, this process 
of investing one's savings or capital, for the earning 
of a just income has been viewed not only as per- 
fectly legitimate, but as a virtue of a very high order. 
Thrifty parents and teachers have taught their 
young people to save and invest their savings for a 
future income. It was the man who refused to do 
this and thereby failed to prepare for leisure and old 



16 Capital and Profits 

age that was regarded as criminally negligent, 
while the man who looked ahead and saved was re- 
garded as the truly thrifty and commendable person. 

But to the amazement of every intelligent person 
who becomes acquainted with Marxism for the first 
time, Marxism affirms that this whole process of 
investing one's savings for an income is illegitimate. 
It is a process, says Marxism, of pure robbery. 
Hence, whether a man invests money in a saw-mill 
for a profit, or a worker deposits his savings in a 
savings bank for a three or four per cent dividend, 
in either case, the supposed earnings are just simply 
robbery, the robbery, — says Marx, — which capital 
exacts from labor. A man may put his money in a 
savings bank for safe-keeping, but, says Marxism, 
he has no right to receive a cent of dividends on 
that money. And a man may put money into a 
saw-mill in order to provide himself with machinery 
to work with, but unless he runs the mill himself 
he has no right to receive a cent of profit from his 
invested capital in the mill. And Marxist socialism 
affirms its purpose, in our reconstructed industries, 
to sweep all investment of savings for the earning 
of dividends from our whole economic life. If 
Marxism should be rigidly introduced, the only source 
of income allowed to any man would be the simple 
earnings of his labor. 

The teaching of Marxism, therefore, concerning 
capital and profits, is radically different from the 
accepted view. And it seeks to revolutionize, and, 
if adopted, will sweep away one of the most important 
foundations of our present economic life. The 



The Two Views 17 

Marxist view of capital and profits should not, there- 
fore, be permitted to prevail without careful con- 
sideration. And, before we reconstruct our industrial 
system, we should carefully decide whether we shall, 
or shall not, adopt the Marxist view. 

4. 

Above all, we should not permit the people to 
adopt the Marxist position without their clearly 
knowing what they are doing and why they do it. 
It is a fact, of which most people are ignorant, that 
practically every scheme of industrial reconstruction 
proposed today, unconsciously or deliberately adopts 
the Marxist position, and will sweep away all in- 
dividual investment of capital for an income. 

It is a startling fact, of which many are not aware 
that practically every scheme of public ownership, 
proposed by persons, who are outside of the Socialist 
party and have no connection with that party, un- 
consciously adopts the Marxist position and will 
abolish this whole factor of the investment of one's 
savings for an income from all human life. 

To illustrate. The proposition is widely made 
today that we turn our railroads and other industries 
over to the government to be run like the United 
States mail. But those who propose such a method 
of public ownership never seem to reflect that such 
a scheme, if adopted, would annihilate all possi- 
bility of the individual investment of one's savings 
for an income. They do not see that such a scheme 
would force every person to enter upon a hand to 
mouth existence in which each person's sole income 



18 Capital and Profits 

would be the earnings of his labor, and when the 
worker stopped work his whole income would cease. 
And yet such would be the actual result of adopting 
a form of public ownership corresponding to that 
of the United States mail, as it can be readily seen. 

For the method of securing the capital necessary 
to carry on the United States mailing service is 
radically different from that employed in the pri- 
vately owned industries. In the privately owned 
industries the capital is individually subscribed and 
on this capital dividends are paid. The private 
corporation, therefore, provides a place for the in- 
vestment of individual savings and the earning of 
an income from them. But the business of the 
United States mail offers no such opportunity. 
On the contrary it makes such investment of sav- 
ings an impossibility. For the capital invested in 
the United States mail is not individually sub- 
scribed. It is raised by indirect taxation or by 
taking it out of the business " as we go along." 

The result is that while the United States mail 
offers work to its employes at a supposed just 
wage or salary, and provides a service to the public 
at a supposed just price, yet it provides no oppor- 
tunity for any one to invest his or her savings in 
the business for the earning of an income from them. 

If, therefore, the same method of public owner- 
ship were applied to our whole industrial system, 
that is, to every plant, the result would inevitably 
follow that all individual investment of savings in 
our country's industries for an income would be 
abolished. 



The Two Views 19 

Now such a change in our economic processes 
would be simply revolutionary and yet nobody 
seems to be aware of the tremendously revolutionary 
character of the results which such a change will 
effect. Indeed, those who propose these revolu- 
tionary schemes of industrial reconstruction, do so 
in apparently entire unconsciousness of their revo- 
lutionary character. And they eliminate this im- 
portant factor of the investment of individual sav- 
ings for an income, not because they have studied 
Marx, — for they evidently know nothing about him 
— nor from any conviction deliberately formed; but 
from sheer economic blundering, from the fact that 
they have never seriously investigated the great 
factors that enter into our economic life. They 
have not even asked, apparently, what those fac- 
tors are. 

But this is not all. What these immature reform- 
ers will do from sheer economic incompetence and 
blundering, the whole Socialist party proposes to 
effect from deliberate conviction. For it is a fact, of 
which all persons are not yet fully aware, that the 
whole socialist party, consciously and enthusiasti- 
cally adopts the Marxist view of capital and profits. 
It affirms, with Marx, that all profits, whether in 
the form of rents, interest or dividends, are sheer 
robbery. And it avows its determination to abolish 
all profits and all investment of savings for an in- 
come, from our whole economic life. The Socialist 
party proposes, therefore, not only to secure the 
public ownership of our industries, but to revolu- 
tionize our economic principles and methods, and 



20 Capital and Profits 

annihilate all possibility of investing one's savings 
for an income. 

Thus, the economic teachings of Karl Marx have 
taken possession of the whole Socialist party and are 
maintained by all its members with almost fanatical 
determination. The dogma that profits are nothing 
but the robbery which capital exacts from labor 
and, therefore, must be abolished, is assumed by 
every good socialist as almost a self-evident truth. 
It is taught or assumed in all socialist literature. It 
is taught in every socialist school, it falls from the 
lips of every socialist orator. No accredited socialist 
agent is permitted to sell literature that opposes 
this Marxist view. And all socialist writers, hitherto, 
have avowed that the coming of the Socialist party 
into power means the abolition of all profits on cap- 
ital. " The socialist regime," — says Spargo, a prom- 
inent socialist writer and speaker, — " will abolish 
profit." (Spargo's Socialism, page 160.) 

It can be seen, then, that practically every 
method of industrial reconstruction proposed today, 
unconsciously or deliberately adopts the Marxist 
view and will eliminate all investment of savings 
for an income from our economic life. 

The time has come, therefore, when this whole 
subject of capital and profits must be carefully 
investigated. If it be true that this question con- 
cerning capital and profits has been overlooked in 
the past by those who seek to reconstruct our in- 
dustrial system, it must be overlooked by them no 
longer. Above all, we must not, through sheer 
economic incompetence and blundering, permit our- 



The Two Views 21 

selves to fall into economic error and adopt such 
changes in our industrial system as shall prove 
disastrous to our economic welfare. 

The disciples of Marx have hitherto regarded the 
position taken by their great leader as impregnable; 
and they challenge a criticism of his views. The 
time has come when this challenge must be met 
and all socialists and all others interested in indus- 
trial reconstruction, should come to inquire most 
seriously, whether the Marxist view is correct or 
not. For while Marx was right in his general 
arraignment of modern capitalism and in his general 
teaching regarding the class struggle, yet it can be 
shown that he was wrong in his conception of the 
nature and use of a legitimate capital. And the 
socialist party will never be able to reconstruct our 
industrial system, even if it should come into power, 
until the members of that party free their minds 
of the false view of capital and profits which is 
embodied in all the writings of Karl Marx, their 
great leader. And every method of industrial re- 
construction which consciously or unconsciously 
falls into the Marxist error and eliminates the 
factor of capital and profits from our economic life 
will fail. 



CHAPTER II 

What is Capital? 

THE beginning of the Marxist error concerning 
capital and profits lies in Marx's wrong con- 
ception and wrong definition of capital. For Marx's 
definition of capital and its use is one-sided and 
misleading and from this error all his subsequent 
errors spring. 

The Marxist definition of capital.— Marx 
practically identified capital with mere money (or 
commodities) employed solely to make a profit; and 
this profit he implied is always unjust. 

In the fourth and fifth chapters of Capital he 
defines " merchants' " capital as money employed 
in buying and selling for a profit; and he implies 
that the profit thus made is always unjust, — a 
proposition which is not true. Thus — to paraphrase 
Marx's own illustration — when a man buys two 
thousand pounds of cotton for five hundred dollars 
and sells it for five hundred and fifty, he makes a 
profit of fifty dollars in the deal. But says Marx, 
since the cotton was worth no more when he sold 
it than when he bought it, the profit of fifty dollars 
is an unjust profit. He bought and sold the cotton not 
for use but for profit. Now, says Marx, when a 
man takes money and employs it to buy and sell 
commodities not for use but for profit, the money 

22 



What is Capital? 23 

so used is capital — " merchants' " capital. And the 
man who so uses it is a capitalist, and to use money 
in this way for profit is one form of capitalism. 
" Money which begets money, — such is the de- 
scription of capital," — says Marx, — " from the 
mouths of its first interpreters, the merchantilists." 
" Buying in order to sell, or more accurately, buy- 
ing in order to sell dearer, appears certainly to be 
a form peculiar to one kind of capital alone, mer- 
chants' capital." — (Marx's Capital, Vol. I, page 
173.) 

Having thus defined the nature of " merchants " 
capital as money used to buy and sell commodities 
for a profit, Marx proceeds in chapters six, seven 
and eight, to show what industrial capital is. For 
industrial capital is, according to Marx, money 
used to hire labor for the purpose of making a 
profit out of the worker by paying him less than 
his labor is worth. Thus a manufacturer of cotton 
yarn hires a man to make yarn in his factory. Now 
the cost of supporting a working man is, we will 
say, says Marx, only eighty cents a day, and this 
is all that the capitalist pays the worker for his 
day's work. But a man's work is able to produce 
twice the cost of his support, or one dollar and 
sixty cents a day. The capitalist makes, therefore, 
a profit, and an unjust profit, of eighty cents a 
day from each worker. Thus the capitalist robs 
the worker of the " surplus value " of his work, 
that is, of the surplus earnings above the bare cost 
of his support. Now says, or implies, Karl Marx, 
money thus used in order to employ labor and make 



24 Capital and Profits 

a profit by robbing the worker of this " surplus 
value " of his labor is industrial capital. And 
money is industrial capital only when so used. 

Thus Marx divides all capital into two great 
divisions, of which there are several subdivisions. 
The two great divisions are " merchants' " capital, 
and " industrial " capital. The former is money 
used to buy and sell commodities for a profit — 
which Marx assumes to be always unjust; and the 
latter is money used in buying and exploiting the 
workers' labor-power for a profit, which is also 
always unjust. Both uses of capital are therefore, 
according to Marx, forms of robbery, and all profits 
are robbery. 

All Marxists, — and that means practically the 
whole socialist party — agree with this definition of 
capital and the origin of the capitalists' profits. 
Furthermore, the profits of both forms of capital 
are traced back to labor, since, say all Marxists, 
labor produces all things. " From the surplus of 
the laborer's product over their necessary cost of 
subsistence," says John Spargo, a prominent Marx- 
ian socialist, — " the capitalists derive their profits. 
This is the Marxian theory of surplus-value in a 
nutshell. Rents, interest, and profit, the three great 
divisions of capitalist income into which this surplus- 
value is divided, are thus traced back to the funda- 
mental exploitation of labor." — (Spargo's Social- 
ism, page 205.) 

Such is a true exposition of Marx's conception and 
definition of capital. Marx's method of reasoning 
is most labored and his meaning hard to grasp. 



What is Capital? 25 

He takes twelve pages to express what a more skillful 
reasoner would say in twelve lines. His terminology 
is ancient and outrageously perplexing. In the same 
sentence, he will employ the term " value " in three 
different senses. With him, this word sometimes 
stands for cost, sometimes for price, and sometimes 
for utility. It is only by going through each page 
with pencil in hand and carefully translating each 
term into comprehensible English that his meaning 
becomes clear. Not one socialist in a thousand, it 
may be presumed, ever reads him. And it is only 
by reading and re-reading his book with pencil in 
hand that one learns what he is trying to say. But 
difficult though it be to understand Marx, yet the 
foregoing pages give the true exposition of his con- 
ception and definition of capital, and this appears 
to be the idea of capital which lies back in the mind 
of all thorough-going Marxists, and all members of 
the Socialist party. 

Assuming that the foregoing exposition is correct, 
it can be perceived that capital, according to Marx, 
is primarily money, and it is money used, not for 
service, but for the making of a profit, which he 
assumes to be always robbery. And a capitalist 
in his mind, is one who employs money for this specific 
purpose. And " capitalism," a term much used by 
Marxists, means the employment of money not for 
useful service, but either in buying or selling com- 
modities to make a profit, or in the employment of 
labor for the purpose of robbing the worker of the 
" surplus value " of his labor, that is, its value, 
above the mere cost of his support. Capital, there- 



26 Capital and Profits 

fore, according to Marx, is always predaceous; 
capitalism is always a disguised form of robbery, and 
all profits are disguised plunder. 



Is Marx's conception of capital and profits correct ? 

While it must be admitted that the extortion of 
unjust profits is a characteristic of modern capitalism 
and that this is the crime of the age which it is the 
mission of the present generation to abolish, never- 
theless, in this definition Marx has given a one- 
sided, and, therefore, incorrect and misleading 
definition of capital and overlooked its true use and 
function. And this is the beginning of his error. 

What, then is capital ? Two agents are em- 
ployed by man in the supply of human needs. The 
first is man's own power to work, the second is the 
productive power of agents outside of man, which 
man uses such as land, horses and machinery. 

Now the name which economic science applies to 
man's power to work is labor or labor power. The 
name which it applies to all those agents which man 
uses, outside of man, is capital. And these two 
agents must be carefully distinguished, if we are 
to do any correct economic thinking. 

To illustrate. Here is a farmer plowing his field. 
The whole energy of body and mind which he employs 
in holding the plow and driving the team is labor or 
labor power. But the horses, the plow and the har- 
ness, are all forms of capital. For they are the agents 
outside of the man which the man uses in the plow- 
ing of the field. The land is also a form of capital. 



What is Capital? 27 

For he uses it in human service, as a source of 
income. For when he shall have plowed it and sown 
it with seed, the forces of soil, rain and sun will go 
to work and produce the harvest. The farmers' 
house and barns, and even the clothing which he 
wears, are also for the same reason forms of capital. 

Certain economists have endeavored to restrict 
the application of the term capital to those material 
agents that are employed in " production " only. 
Thus the money which a man might employ in 
building and running a saw-mill would be capital; 
but the money which he uses in buying, furnishing 
and running his house, say they, is not capital; for 
it is not used by him directly in production. Now 
while it is important for a man to distinguish between 
the cost of running his business and the cost of run- 
ning his house, nevertheless, the restriction of the 
term capital to the former alone is fallacious, 
confusing and misleading. 

For capital may be, indeed, correctly denned as 
wealth viewed as the agent of production, or more 
correctly, as the source of income. But all wealth, 
properly viewed is, directly or indirectly, a source of 
income. This income may accrue in the form of 
money or it may come in the form of some direct 
and useful service. But in either case it is a real 
income and it is the equivalent of an income in 
the form of money. 

Take for example the house in which a man 
lives. That house performs for him a real service. 
It is, therefore, to him a real source of income. 
If he did not possess that house, he would have to 



28 Capital and Profits 

pay rent to somebody else if he would enjoy the 
same comforts. The house is, therefore, a real 
source of income — an income equivalent to the 
rental which he would have to pay for another 
house of the same character. So also even the 
automobile which the man owns and uses for 
pleasure is capital. For it is a real source of income 
to the owner. For if he did not own that auto- 
mobile, he would be obliged to pay rental to an- 
other man, if he would enjoy the same pleasures. 
The automobile, therefore, brings him in a real 
income, which is the equivalent of the rental which 
he would otherwise have to pay to another man. 
The boy who begins life owning only the clothes 
on his back and one dollar in his pocket, has, 
strictly speaking so much capital to begin life 
with. He is so much better off than the boy who 
does not own the clothes on his back. And 
if he owns a house and lot besides, he has in reality 
that much more of capital to begin life with. 

The truth is that in order to meet all human 
needs, all these various material agents are required. 
Whosoever, therefore, is possessed of these utilities, 
is possessed of just so much capital with which 
to sustain life and supply his needs. Both the 
house and the business are the necessary factors of 
the same great whole. The one ministers directly, 
and the other indirectly, to human needs. Both 
are equally necessary and, therefore, both are forms 
of capital. 

True economic science teaches, therefore, that the 
thing with which capital is to be compared is not 



What is Capital? 29 

wealth, but labor. For capital and labor belong to 
the same category in that both are productive and 
both are the correlative parts of the same great whole; 
they are the two necessary factors employed in all 
human service. We cannot, indeed, produce a 
single thing, nor perform any service for man, 
without the employment of both capital and labor. 
The two are related to each other like the two blades 
of shears, both of which are necessary to cut. 

And yet the two are distinct, and we need two 
distinct terms to distinguish the one from the other. 
In every enterprise in which man may engage, in 
every service which he seeks to perform, he must 
employ and take into careful account the amount 
of capital, on the one hand, and the amount of labor 
on the other, that are necessary to achieve the task 
or perform the service. Now the term labor 
stands for all the energies within man, the energies 
of hand and brain — that are employed in human 
service; the term capital, therefore, must naturally 
and logically embrace all those agents outside of 
man which man employs and must employ in human 
service. Hence, land, horses, hens, when appro- 
priated by man, are forms of capital, because they 
are external to man and can be employed in useful 
service. Land produces wheat, horses draw loads, 
and hens lay eggs. They are all sources of income. 
They are all types of the same thing. For the 
same reason locomotives, factories, human homes, 
schoolhouses, and even our churches and govern- 
ment-buildings and all works of art, are all forms 



30 Capital and Profits 

of capital. For capital is nothing but nature's forces 
harnessed for the use of man. 

3. 

If the foregoing pages contain the true definition 
of capital as distinguished from labor, it follows that 
Marx's definition is one-sided and misleading. For 
he failed to distinguish that most necessary thing 
in our economic life which the word capital connotes. 
Instead of seeing that the word capital stands for 
those great agencies of nature that have been organ- 
ized and harnessed by man for the use of man, he 
identified the term, in reality, with mere money and 
with money, when used in buying and selling for a 
profit or in exploiting labor for a profit. But capital 
is something more than mere money. For money 
(including stocks and bonds) is, strictly speaking, 
not capital at all. Money is in reality a title to 
capital. When a man holds a one-thousand dollar 
bill in his hand, that bill signifies not that he owns 
a small colored piece of paper, but one thousand 
dollars' worth of the capital, or gold of the country. 
This great truth Marx seems to have overlooked. 
Marx, indeed, recognized the use of land and mach- 
inery. But he viewed them merely as the " tools " 
or " instruments " employed by labor. He failed 
entirely to see in them a distinct, productive factor. 
He confounded them with labor. And here is the 
beginning of his error. 

Furthermore, while capital, especially in the form 
of money, is sometimes used for the purpose of 
plunder, yet this is not, as Marx implies, its only use, 



What is Capital? 31 

nor is this its primary use. For the primary and 
fundamental use of money as embodied in lands, 
horses, machinery and human homes, is to contribute 
to human service. And all capital, as thus defined, 
is an essential factor in human life and civilization. 

Marx's definition of the capitalist is also wrong. 
For the true capitalist is not necessarily a man who 
employs money to make an unjust profit or to rob 
labor. But he is a man who, instead of relying, like 
the brute or the savage on mere crude human 
strength or chance to supply his needs, seeks by 
the intelligent organization and harnessing of nature's 
forces, to make them work for him and thereby 
supply his needs with less labor and with far greater 
abundance and regularity than before. 

The first man, therefore, who carved out a flint 
knife and used it for cutting was a capitalist. The 
knife was his capital and the service which it per- 
formed in cutting was his profit derived from the 
knife. The first man who made a bow and arrow 
in hunting was a capitalist. The bow and arrow 
were his capital and the increase in the number of 
animals which they enabled him to kill were his 
profits from the bow and the arrow. The first man 
who hollowed out a boat and used it for fishing was 
a capitalist. The boat was his capital and the in- 
crease in the number of fish which it enabled him 
to catch was his profit from the boat. The very 
word profit means " an increase." 

And the true capitalist today is one who instead 
of relying on mere brute force or crude unassisted 
labor for the acquisition of wealth and the supply 



32 Capital and Profits 

of human needs, seeks — by the harnessing of a 
stream in the building of a saw-mill, or by the 
harnessing of steam or electricity, or by the build- 
ing of a railroad — to make these material agents 
work for society and thereby produce far greater 
results than could be achieved by mere labor alone. 

And true " capitalism " is not as Marx makes it 
to be, a mere process of buying and selling, or 
exploiting labor, for an unjust profit, — a disguised 
form of plunder, — but it is the art of so combining, 
organizing and utilizing nature's agents, as to make 
them work for man and increase his comforts a 
thousand-fold. The man who, as Marx describes, 
robs labor and gets possession of the capital, which 
labor creates and appropriates it to his own profit, 
is not a true capitalist. He is in reality a pseudo- 
capitalist, an exploiter and plunderer of both labor 
and capital. And it is imperative that we distin- 
guish between the real honest capitalist who justly 
creates and employs capital for the use of humanity, 
and receives a just income from it, and the pseudo- 
capitalist, or dishonest capitalist who by astute 
business management, while the worker is asleep, 
plunders the worker of what is rightfully his. 

If the preceding pages give a correct definition 
of capital and of capitalism, it is easy to see the 
beginning of Marx's error, namely, in his narrow 
and one-sided application of the term capital. 
For Marx has taken a mere adventitious phase of 
capital and capitalism and identified that with the 
whole thing. He is like the man who, because 
some of the money in the country is counterfeit, 



What is Capital? 33 

affirms that all money is counterfeit and, therefore, 
that the sole use of money is to deceive and plunder. 
And this is the fallacy that underlies all Marx's 
reasoning and runs all through his book from the 
first illustration which he uses down to the very 
last page. It is the logical fallacy which in college 
our professor of logic called the fallacy of the " un- 
distributed middle," — a fallacy which is often used, 
is very deceptive, and against which he warned us 
to be on our guard. Marx by assuming that, be- 
cause some capital is used for plunder, therefore, 
all capital is used for plunder and all the earnings 
of capital are plunder, begs the very question at 
issue. 

In conclusion, it should be said that it is doubt- 
ful whether in all Marxist literature a single in- 
stance can be found where any Marxist has made 
the least attempt to prove that profits, in the form 
of rents, interest and dividends, are plunder. This 
proposition is always dogmatically assumed as 
self-evident. It is taken for granted. And then, 
on this false assumption, the whole Marxist economic 
philosophy is built. And the whole Socialist party 
has been caught by this fallacy. 



PART II 

The Productivity of Capital — Rents, 
Interest and Dividends 



CHAPTER III 

The Productivity of Capital 

THE fundamental assumption of Marx was, as 
it has been said, that labor produces every- 
thing, that capital produces nothing, and that, 
therefore, all profits, whether in the form of rents, 
interest or dividends, are nothing but the robbery 
which capital exacts from labor and, therefore, 
should be abolished. Whosoever is familiar with 
Marxist periodicals and other literature will testify 
to the constancy and emphasis with which this 
affirmation is made. To give a single instance 
among a thousand. The Appeal to Reason, a 
strong Marxist journal, said in the issue of August 
19th, 1910, in the column headed ' 'Asking About 
Socialism," that "under Socialism there will be 
no taking of interest " and " no profit-taking." 
And because of this, " there will, therefore, be no 
investments " under Socialism. And the same 
paragraph goes on to declare that if, under Socialism 
a man should " invest " the sum of $100,000 in the 
industries of the country, he would receive nothing 
for its use. And the journal constantly declares 
that Socialism will abolish all this profit-taking 
because such profit-taking is sheer robbery. 

In opposition to this affirmation of Marx, a sound 
economics maintains that capital, when correctly 

37 



38 Capital and Profits 

defined, is productive and performs a real service 
for man. Capital earns a real profit and performs a 
real service for the owner or user of it. 

Here is a young man who begins adult life with 
two hands and two horses. His hands represent 
his power to work, his horses are his capital. Will 
anyone say that those horses can produce nothing 
and perform no service for the owner? Suppose 
that the young man should hire himself and team 
to plow a field. Will anyone be so hardy as to say 
that the horses can do nothing toward the plowing 
of the field. 

The capital now invested in American industries 
and otherwise amounts to one hundred and twenty 
billions of dollars in gold. It embraces farms, 
cattle, horses, railroads, telephones and telegraphs, 
coal-mines and oil-wells, and human homes. Will 
anyone say that all this capital — all these great 
material agents, created by human labor, produce 
nothing and perform no useful service ? 

If all this capital were annihilated today, it would 
require twenty-five years of toil on the part of the 
combined adult population of the country to re- 
produce it. Now if all capital were unproduc- 
tive, if it performed no useful service for man, why 
should men spend these many years of the severest 
toil in creating it ? 

The fact is that capital is enormously productive; 
and the use of capital marked the very beginning of 
civilization. As it has been said before, the first man 
to make a flint knife was a capitalist, and in the 
making of the knife, he took a decisive step toward 



Productivity of Capital 39 

civilization. And the primitive man who first caught 
a cow and, instead of killing and eating her on the 
spot, corralled her and made her work for him, was 
a capitalist and took a very long step toward civi- 
lization. The cow was his capital and he corralled 
her because she was productive. She furnished 
him with milk, butter and veal, and these were his 
profits from the cow, and they greatly added to the 
comforts of life. When man thus learned the use 
of capital, he acquired one of the most fundamental 
factors of civilization and without capital, civili- 
zation would perish. Indeed, in the future, capital 
will play an ever increasing importance in human life. 
And if the time shall come when, as some socialists 
aver, four hours' work per day will supply all our 
material necessities, they will do so only because 
we shall have acquired so much capital and made 
it so productive that we can, so to speak, sit still a 
good part of the time while our capital, that is, our 
farms, horses and machinery are working for us. 



But there is another truth concerning capital 
which must also be emphasized. It is this. Capital 
is not only productive, but it is able to produce far 
more than its cost. 

Marx, in his discussion of the productivity of 
labor, says that labor will produce twice the cost 
of its production and support. Thus he says that 
it costs eighty cents a day to support labor, but the 
laborer is able to produce one dollar and sixty cents 
worth of yarn or eighty cents more than his support. 



40 Capital and Profits 

And this eighty cents he calls the surplus value of 
labor. 

Now what is true of labor is true, to a far greater 
degree, of capital. It also creates a surplus value 
above its cost. 

Here, for example, is a man in New England who 
lays a pipe from the spring on the hill-side above 
his house into his kitchen. That simple system of 
water-works is so much capital which his own 
labor, we will suppose, has created. Now, that 
simple system of water-works is productive, it per- 
forms a most useful service for the owner. But this 
is not all. It produces far more than its cost. For 
the cost of making and laying that pipe was, 
we will say, the equivalent of twenty days of labor. 
But, by bringing the water down the hill into his 
very kitchen ready for use, it will perform a service 
equivalent, we will say, to twelve hundred days of 
labor. It performs a service, therefore, sixty times 
greater than its cost. It, therefore, certainly 
creates a " surplus value " above its cost. 

Indeed, this fact that capital will produce an in- 
come far greater than its cost and care is recognized 
by all intelligent men. The full earnings of capital 
are called its gross earnings or gross profits. The 
surplus which capital earns above its cost and care 
is called its " net earnings " or " net profits." If 
capital were not able to earn a surplus, and a large 
surplus, above its cost and care, it would not be 
employed nor would men take the trouble of creating 
it. 

Would a man clear up, fence off, and cultivate a 



Productivity of Capital 41 

farm, if the produce was relatively less than the cost 
of the farm and the labor of caring for and running 
it ? Would men build locomotives, if the service 
which they performed was relatively less than the 
labor necessary to manufacture them and run them ? 
Certainly the only ground for the creation and use of 
capital lies in the fact, not only that there is a profit 
in it, but also that the profit accruing is far greater 
than the labor put into its creation and care. 

3. 
This great truth of the productivity of capital 
seems to have been entirely overlooked or dog- 
matically denied by all Marxists. Spargo, a 
prominent Marxist, in trying to affirm that all profits 
are the plunder exacted from labor, says (referring 
to the old abstinence theory of profits), — ' 'Abstin- 
ence (self-denial), obviously produces nothing; it can 
only "save the wealth already produced by labor, 
and no automatic increase of that stored wealth is 
possible' ' ( Spargo' s Socialism, page 205) . The italics 
are ours. By this italicized phrase, Spargo evidently 
affirms the non-productivity of capital. But in 
this affirmation, he is grossly wrong. When the 
farmer plants a field with apple-trees and berry 
shrubs, will not these trees and shrubs, for a time at 
least, automatically produce fruit for the farmer ? 
The farmer domesticates a small herd of cattle and 
turns them into a large fenced field for the summer. 
Will not that herd go to work and automatically 
produce milk and calves for the farmer, and will it 
not multiply automatically so that the farmer will 



42 Capital and Profits 

own twice as big a herd in the Autumn as in the 
Spring ? The farmer builds a water-pipe from the 
spring up in the hills, to his kitchen. Will not that 
water-pipe automatically supply his house with 
water for years to come ? And yet all these things 
are capital. 

Without doubt it is possible to store up 
wealth in such a way that it will go to waste. And 
it is possible to utilize capital in such a way that 
it will produce very little. There is a wise and 
unwise use of capital. A house that is allowed to 
stand idle and uncared for will, indeed, perform no 
useful service for anybody; and vast amounts of 
manufactured clothing stored up in warerooms and 
allowed to be eaten by moths will automatically do 
nothing useful and will produce nothing. But cap- 
ital that is skilfully harnessed and wisely utilized 
is productive, indeed, far more productive than 
human labor. It will do what human labor alone 
cannot do. It will produce thousands of bushels 
of wheat, carry enormous loads, bore through 
mountains, and even enable men to fly through 
the air. 

And contrary to the teachings of all Marxists, it 
can be affirmed that capital will breed capital, and 
money will breed money, with no injustice to anyone. 

Marxists condemn " the breeding of one dollar by 
another dollar " as as if it were something " horrible 
and to be abolished." Nevertheless, it is a fact that 
one dollar, when skilfully invested, will breed another 
dollar and no robbery need be committed in the 
process. A certain farmer's boy invested a dollar, 



Productivity of Capital 43 

which he had earned, in two hens. These hens 
immediately went to work and produced, in a short 
time, twenty pullets, which sold for twenty 
cents a piece or four dollars. The boy's one dollar 
had bred four dollars, and he had robbed no one 
in the process. The hens did the work for him. 
And this ability to make capital breed capital, that 
is to make it grow and multiply under our hands 
by the use of nature's forces is one of the funda- 
mental factors of civilization and progress. 

When the wrecked Robinson Crusoe accidentally 
dropped a few grains of wheat from a mouse-eaten 
sack on the ground in front of his cave-home, those 
few grains produced a large handful of wheat during 
the summer. This handful, Robinson Crusoe care- 
fully preserved and sowed in the following season. 
And from those few grains, accidentally preserved, 
he soon had produced a large field of growing wheat. 
And yet Robinson Crusoe had exploited no one, 
for he was then the only man on the island. And 
what Crusoe did with the few grains of wheat, he 
did with everything else that he succeeded in bring- 
ing from the ship, and with everything that he dis- 
covered on the island. He caused everything under 
his hands to grow and multiply and yield a service 
to himself and produce a hundred fold. When he- 
landed on the island he was a poor wrecked mari- 
ner; when he left the island he was a wealthy nam 
because he had made everything to grow and mul- 
tiply under his hands. He was a thrifty capitalist. 

What Robinson Crusoe did for himself on his 
lonely island, the Almighty evidently designs all 



44 Capital and Profits 

humanity individually and collectively to do for 
itself on this beautiful earth, namely to conquer 
nature's forces and make them work for man and 
to grow and multiply and produce a hundredfold. 
Indeed, the Almighty did not intend man to live, 
as it can be shown, so much by labor as by capital, 
that is, by nature's forces harnessed and reduced 
to human service. For man, physically viewed, 
is, relatively to his size, the weakest of all crea- 
tures. He cannot run as fast as the dog, nor fly 
like the bird, nor climb like the monkey, nor draw 
as big a load as the ox or horse, nor, unarmed, fight 
as good a battle as the bear or tiger. Even a small 
wildcat will kill an unarmed man. Throw a man with 
his hands only on the earth anywhere and he is less 
capable of making a living than any other creature. 
But, though weak physically, man excels men- 
tally. And by the powers of his mind he is able 
to do what the lower animals can not do. He can 
harness nature's forces and make them work for 
him, and he is able thereby to produce for himself 
a thousandfold more than all the animal creation 
put together. It is a fair inference, therefore, that 
the Almighty intended that man should live not 
by crude physical labor, but by his brains, by his 
brain-power applied to nature's forces in making 
them work for him. But this method of living is 
possible only because nature's forces, when properly 
harnessed and utilized, are productive. While, 
therefore, no man has a right to harness and 
exploit his fellow-men — indeed, this is the crime 
of the ages which this age seeks to remedy — never- 



Productivity of Capital 45 

theless, every man has a right to harness and 
exploit nature's forces, outside of man, to the 
full extent of his power. And to do this is not 
robbery, and neither are the profits, which the cap- 
italist thus obtains, the fruit of robbery. They 
are the products of those natural agents which he 
has had the foresight and the skill to harness. 

4. 
This chapter may be concluded by saying, first, 
that, contrary to Marxism, capital is productive; it 
earns a real profit and performs a real service for 
the owner. And, second, it is enormously produc- 
tive. It produces a profit or service far in excess, — 
indeed, sometimes many hundred times greater than 
the equivalent of the labor expended in its creation 
and use. It can be perceived, therefore, third, that 
the profits of the capitalist do not necessarily come 
from the robbery of labor but from the capital, the 
land, the horses, the cows, the hens, the water-power, 
the electricity, which he has harnessed and employs. 
When the farmer builds up through the years a 
large and thriving agricultural plant, with culti- 
vated fields and barns with an adequate water- 
power system, with an electric motor, and vast 
herds and flocks and poultry, — so that the product 
of the plant is many times greater than his 
own need, and when he takes the surplus and sells 
it at a fair price, this profit is not necessarily the 
fruit of robbery, but the legitimate earnings of this 
vast plant, this complex capital, which his labor, 
through the years has created. 



46 Capital and Profits 

While, therefore, it must be admitted that there 
is such a thing as the criminal exploitation of labor, 
nevertheless, it must be affirmed that all profits are 
not plunder and all capital is not the agent of plun- 
der. And until the Marxists come to see this, they 
can entertain no legitimate hope of remedying 
present wrongs nor of reconstructing our present 
system. 

This productivity of capital, it should be said in 
conclusion, is indeed one of the most important 
economic principles which we should recognize and 
it leads to most important results, as it shall be seen 
in the chapters which follow. 



CHAPTER IV 

Legitimacy of Rents, Interest and Dividends 

THE important truth that capital is productive 
brings us to two other important propositions. 
The first is this. The profits which are earned by 
capital, however great they may be, should go, in 
every case, to the man who rightly owns the capital, 
that is, to the worker individually whose labor of 
hand or brain created it or justly purchased it. And 
if two or more men go into business together, then 
these profits should be divided justly according to 
the amount of capital invested by each. 

The grounds for this afhrmation are that the 
production of capital costs labor; and it often costs 
many years of the severest toil. Hence, the worker 
who undergoes self-denial and toil in the creation of 
capital and the harnessing of nature's forces, has the 
right to receive all that this capital, oi* these forces, 
really produce. 

For take again the young man with the two horses. 
Those horses, we will suppose, are the product or 
purchase of his own toil. Who will say, therefore, 
that the earnings of these horses, say two dollars 
and a half a day, should not rightly go to him ? If 
it be true, as Marxists affirm, that the worker has a 
right to the full product of his labor, then is it not 
also true that he has a right to the full product of 
the capital that his labor creates ? 

47 



48 Capital and Profits 

And the earnings of the team should go to the 
owner whether he drives the team himself or hires 
someone else. Marxists everywhere say that the 
products of capital should go to the owner only when 
he uses it himself. A certain gentleman has repeatedly 
asked of Socialists, individually and when met 
together in local meetings, this question, " // one 
man borrows another man's horse, should not the 
borrower pay something for its use?" And the 
unanimous reply has been, " No." " If one man 
lives in another man's house, should he not pay the 
owner a rental for the use of the house" ? "No." 
" If one man borrows another man's money, should 
not the borrower pay interest for the use of the 
money " " No." And Socialist speakers have 
constantly said or implied on the platform that if 
two or more men put capital into a business and hire 
men to work for them, the owners of the capital 
should receive no profit or dividend on their capital. 
On the contrary, all, absolutely all, the product of 
both the labor and the capital should go to the 
hired men, the men who do the work. 

Hence, Marxists say that when the owner of the 
horses, in the case cited before, hires another man 
to drive the team, the hired man should receive the 
combined earnings of himself and team, or five 
dollars a day. 

In this affirmation, Marxism is wrong. For the 
plowing of the field is the product of the combined 
labor of the man and the team. The hired man 
should receive, therefore, the full earnings of his 
labor, say two dollars and a half a day. But the 



Legitimacy of Rents, Interest, Etc. 49 

earnings of the team should go to their owner. For 
the owner of the team is in reality present in the 
team dfc ing his part of the work. 

Again, suppose that a certain worker has put several 
years of hard labor of hand and brain in the building 
of a saw-mill, and, owing to illness must hire another 
worker to run the mill for him. Will not every 
intelligent man say that while the hired man should 
receive the full earnings of his labor and skill in the 
running of the mill, yet the owner should receive the 
full earnings of the mill ? For the mill is his and 
it is productive. It earns an income, a surplus 
profit, over and above the work of the hired man who 
runs it. This therefore should go to the owner. Not 
to allow this will rob the owner, of all the years of toil 
put into the creation of the mill and deprive him of 
all means of support, it will rob him of what is 
rightly his. And yet all Marxist literature and all 
literature published by the Socialist party affirms or 
implies that since the owner does no part of the work 
in the running of the mill, he should receive nothing. 
The hired man on the contrary, should receive all — 
absolutely all — the combined earnings of himself 
and the mill ! 

How men can come to such an unjust conclusion 
is easily understood when we read Marx's " Capital " 
and attend to Marxist speeches generally. For the 
word profit in all Marxist literature and speeches is 
made to be synonymous with " plunder." Holding 
fast to the dogma that labor produces everything 
and capital nothing, the Marxist conclusion is 
inevitable that the hired man should receive the 



50 Capital and Profits 

combined product of his own work and that of 
the mill. But such a position is sheer robbery — 
a robbery as outrageous as that ever perpetrated by 
capital against labor. 

2. 

Marxist socialists have tried to weaken the force 
of this argument, by saying: " Capital may be 
productive when it is used and directed by labor, 
but it can produce nothing of itself. It is, therefore, 
not a distinct factor of production, but the mere tool 
or agent of labor. Hence the laborers should receive 
the full product of the work,but the tools,the material 
agents, should receive nothing." 

The proper reply to this is, first, that the agents 
of nature employed by man in useful service, are 
not, as all Marxists imply, mere inert, non-produc- 
tive things, having no creative power of themselves. 
Professors in physics tell their students in college 
that there is nothing really inert or dead in the 
universe; that the whole material world is composed 
in the last analysis of molecules or atoms, which are 
great centers of force, and that they are ever active, 
putting forth energy, doing their work, upholding 
the universe and carrying on nature's activities. 
Even the walls of a house are constituted ultimately 
of molecules which are ever energizing and ever act- 
ive. Each molecule is doing its individual work and 
all act in upholding the walls of the house and pro- 
tecting the inmates from the storm and the cold. Even 
the crude flint knife which the savage uses is made 
up of living, energizing atoms and it is because they 
are living and energizing that the knife is able to 



Legitimacy of Rents, Interest, Etc. 51 

cut. And, certainly, whosoever will once contem- 
plate the work of the horses in the drawing of the 
plow or the cow in producing milk and veal, or the 
hen in laying eggs, or the soil in producing wheat, 
or the locomotive in drawing its mighty loads, must 
admit that all these material agents are vital, ener- 
gizing, active things; they have power in and of 
themselves to produce and perform useful service 
for man. They are something more, therefore, 
than mere inert tools and dead, non-productive 
agents employed by labor. They are themselves 
productive as well as labor. 

And if it be true that these things can produce 
little or nothing without the use and directing 
agency of labor, it is equally true that labor can 
produce little or nothing without the aid, the co- 
operation, of these productive agents or forces. Of 
what value would the man's labor be in the plowing of 
the field without the use of the horse? And of what 
value would the man's work be in the saw-mill with- 
out the use of the harnessed stream? Reduce a man 
to the use of his hands alone and what can he achieve? 

The truth is that every service performed by man 
and every function of civilization requires the co- 
operation, and is the product of both capital and 
labor. And this truth holds good not merely in 
the production of man's material supplies, but also 
in the performance of every high service. Take the 
great function of education. It is carried on and 
made successful by the co-operation of both capital 
and labor. For the school building, with its furni- 
ture and apparatus, constitutes the necessary capi- 



52 Capital and Profits 

tal, and the teacher who instructs the mind and the 
janitor who cares for the building are workers. 
Even the worship of God can be carried on only 
by the combined employment of both capital and 
labor. The church edifice with all its equipments 
its apparatus for heating and lighting, its books and 
instruments of music, are all forms of capital and 
are necessary to the service performed ; the preacher 
and the singers and the janitor — whose service must 
not be forgotten — afford the needed labor. 

Thus every function of civilization can, indeed, 
be carried on only by the combined employment of 
both capital and labor. And if it be true that cap- 
ital can do nothing without the use of labor, it is 
equally true that labor can achieve nothing without 
the use of capital. The worker, therefore, who 
creates, with hand and brain, the capital that is 
needed for any useful function, performs as neces- 
sary a service for humanity as the worker who sup- 
plies the labor needed for the operation of that 
capital. Both are necessary. Both are productive. 
Each fills a necessary place in production. And 
every human service is the product of the combined 
agency of both the laborer and the capitalist, when 
that word is rightly employed. Hence, when a 
worker by his labor creates capital and gives it for 
the use of society, he has a right to receive in return 
the equivalent of the earnings of that capital. 

3. 

But if profits are right, wherein lies the wrong 
of the present system? The wrong of the present 



Legitimacy of Rents, Interest, Etc. 53 

system does not lie in that profits are wrong, but 
in that the profits paid are often too great or they go 
to the wrong persons. One of the fatal errors of Marx 
in his discussion of capital lay in his failure to dis- 
tinguish between the real creator and therefore, 
rightful owner of capital, on the one hand, and the 
astute exploiter, or pseudo-capitalist, on the other; 
for these two classes are distinct from each other. 

For who are the rightful owners of the capital 
of this country and who are those who should of 
right receive the earnings of that capital? The 
rightful owners of the capital of this country are 
the workers of hand and brain whose labor has 
actually created that capital. And it is these and 
not the exploiters and plunderers who should now 
receive the dividends. But who are the exploiters 
of the people, the pseudo-capitalists, who wrongly 
receive not only the profits earned by capital but 
the whole surplus earnings of labor besides? 

The plunderers and exploiters of the people, the 
pseudo-capitalists, are those astute business men 
who, taking advantage of the profound ignorance 
and economic slumber of the people, have acquired 
supreme, irresponsible control of the whole business 
world, and rob the worker not only of the surplus 
earnings of his labor, — as taught by Marx, — but 
thereby rob the worker also of that capital which the 
worker creates and which is, therefore, rightfully his. 
And this is something which Marx did not point 
out. The plunderer, the pseudo-capitalist, is, 
therefore, not the real creator of capital, but he is 
the astute business man who, taking advantage of 



54 Capital and Profits 

the profound ignorance and slumber of the worker, 
first gets control of the business and then expro- 
priates the worker of that capital which is rightfully 
his and then proceeds to draw the dividends which 
should of right go to the worker. The wrong, 
therefore, in the present system does not lie in that 
profits are wrong, but in that those profits are ex- 
cessive and go to the wrong persons. Farthermore, 
these misappropriated earnings of capital represent 
only a small part of the stealings of the plunderer. 
For the plunderer robs the worker when the worker 
buys and when the worker sells. He charges 
excessively high dividends on the capital which 
he has stolen from the worker; and yet when 
the worker succeeds in saving and investing a little 
capital of his own the plunderer pays the worker 
exceedingly low dividends as, three or four per cent. 
And the plunderer, having all power in his own 
hands, robs the worker all the time by low 
wages and graft unspeakable. It is imperative, 
therefore, in this discussion of capital and profits 
that we distinguish between the real creator of 
capital and, therefore, the one to whom of right the 
dividends should go on the one hand, and the mere 
plunderer or pseudo-capitalist on the other, who 
expropriates the worker of his capital and takes 
dividends which are not rightfully his. 

And in advocating the payment of dividends, a 
true economics does not advocate the cause of the 
plunderer, as some Marxist may fear, but of the 
worker. For a true economics merely advocates that 
the worker who creates capital should receive the 



Legitimacy of Rents, Interest, Etc. 55 

full earnings of his capital. A true economics no 
more favors the plunderer than the Marxist, but 
it does advocate that the worker should receive the 
full earnings of his capital as well as the full earn- 
ings of his labor, and there is certainly nothing 
unjust in this. And it maintains that in order to 
do justice, these two kinds of earnings must be 
kept distinct. 

Finally, it can be seen that in advocating the 
payment of profits on capital a true economics does 
not advocate the payment of a man a reward 
merely for owning something. Once when a certain 
person was presenting this subject to a certain 
Marxian socialist and said, that when a man in- 
vested capital in his country's industries he should 
receive a dividend on that capital, the Marxist 
retorted— " Then you would pay a man a reward 
merely for owning something! " To which the per- 
son replied — " No, but I would pay a man a recom- 
pense for the service which something which he 
owns performs for the public." It is very hard 
for the Marxist to grasp the idea that capital is 
productive— and that it performs a real service for 
humanity; and that, therefore, when any man by 
the energy of hand and brain, produces capital, — that 
is, factories, waterworks, railroads, and so forth, for 
the service of humanity, he has a right to receive 
the equivalent of the earnings of that capital. And 
yet such is the case. And the Marxist fails to see 
that the evil of the present system lies not in that 
profits, as such, are wrong, but in that the workers 
are in a condition of profound economic slumber, as 



56 Capital and Profits 

I have just said, and they permit the astute business 
man to own the business and thereby expropriate 
the worker of that capital which the worker right- 
fully owns, and of the profits which the worker 
should rightfully receive. And to remedy these 
evils the Marxist fails to see that it is not necessary 
to abolish profit-taking, but to arouse the worker 
and move him to combine with his fellow citizens 
in so reconstructing his country's industries, that 
the worker shall be no longer expropriated by the 
astute business man of that capital and those 
profits which are rightfully his. 

4. 

Assuming then, that profits when correctly defined 
are just and should go to the worker or group of 
workers who rightly owns the capital, certain propo- 
sitions concerning rents, interest and dividends 
are true. 

First, Rents paid for the use of capital are legiti- 
mate when not in excess of the actual earnings of 
the capital used, and when paid to the right person. 

In human society, men must frequently exchange 
not only their labor but also the use of each others 
property or capital. Now suppose that a neighbor 
desires the use for a week or month, of the young 
man's horses as cited before. Should not this neighbor 
pay something for their use? For with their help 
not only is his own work made more valuable, but 
the horses perform a service for him besides. In 
truth the man who owns those horses is really present 
in the horses at work for the man who drives them. 



Legitimacy of Rents, Interest, Etc. 57 

Should not the renter of the horses, therefore, pay 
the owner what their value is worth ? But such pay- 
ment for the use of another person's property or 
capital is rent. And such payment is perfectly just. 
Not to pay rent is robbery. And even under a so- 
cialized industrial system, the same law would stand 
and rents would be obligatory. 

For suppose that all our industries have been 
socialized and that the public corporation has 
houses and horses and automobiles for rental. And 
suppose that a young man should go to the public 
corporation to obtain a house for use. Should not 
the young man pay to the public corporation a 
compensation for the services which the house per- 
forms? And if he should rent a horse or an auto- 
mobile, should not he also pay a rental to the 
public corporation for the service which the horse 
or automobile performs? He certainly should. Not 
to do so would be the part of a parasite and grafter. 

Second, but if rents are right, then interest on 
money is also right. For money represents pro- 
ductive capital, — such as land, horses, cows, ma- 
chinery, locomotives and so forth. Interest, there- 
fore, is but the rental demanded for the use of 
those things which money represents. And this 
payment of interest on money borrowed would be 
as legitimate and obligatory under a socialized in- 
dustrial system as under a private system. For 
money, or the capital which money represents, is 
just as productive under a socialized industrial sys- 
tem as under an individualized system. Hence, 
whether the public should borrow money of the 



58 Capital and Profits 

individual or the individual should borrow money 
of the public, in either case, interest should be paid 
by the borrower to the lender. Hence, when Marx- 
ists say that under socialism the public bank shall 
lend money without interest to individuals, it is advo- 
cating what would be unjust and a form of robbery. 

Finally, if rents and interest are right, then 
dividends are right, for dividends are nothing but 
the profits divided between two or more men who 
put their capital into a common business and divide 
the legitimate earnings of their capital according to 
justice. And such dividends are right and even 
obligatory, not only under a private, but also under 
a public or socialized corporation. For under a 
socialized corporation capital will be just as pro- 
ductive as under a private corporation. And when 
under the socialized corporation, men shall put their 
earnings directly or indirectly into the industries of 
the country, as they inevitably must, they will have 
a right to receive the full earnings of the capital 
which they put in. Not to pay dividends would be 
robbery. 

A sound economics maintains, therefore, that 
capital, when correctly denned, is productive and 
in every case the profit or increase earned by 
capital should go to the worker who rightfully owns 
it. And this law holds good not only under the 
private but also under the socialized corporation. 
Hence, even if Socialism should be introduced 
each worker should be called upon to subscribe his 
share of the required capital and a careful record 
should be kept of the capital which each worker 



Legitimacy of Rents, Interest, Etc. 59 

shall subscribe, and on the capital dividends should 
be paid. In no other way can we get justice and 
justly distribute the products of our common 
industries. 

It may be difficult to determine offhand what 
each worker's capital should receive as compared 
with the worker's labor. And, certainly, labor 
should receive, as Marx rightly affirms, its due 
share of the product of past inventions, the results 
of increased skill and the increase arising from the 
proper division of labor. Nevertheless, it is still 
true that when a worker puts labor into the 
creation of capital, he should receive the earnings 
of that capital; and this law holds equally under a 
private and a socialized system. Until Socialists see 
this, they can arrive at no just method of recon- 
structing the industrial world. 



PART III 

The Practical Bearings of the Sub- 
ject — The Utility of Capital 
and Profits 



CHAPTER V 

The Worker's Two Sources of Income 

THIS great truth that capital is productive and 
that the earnings of capital should go to the 
worker or workers whose labor produced it or 
rightly purchased it, has certain practical bearings 
of the greatest significance, and it is this fact that 
makes the subject of capital and profits so important 
in our discussion of the problem of industrial recon- 
struction. It is these practical bearings of the sub- 
ject which we are now to study. 

The First Proposition to be affirmed is that the 
fact that capital is productive, supplies every worker 
with two legitimate and most important sources of 
income which must be carefully distinguished. And 
it is here where Marxism commits its next error. 

For Marxism, beginning with the affirmation that 
labor produces everything and capital nothing, has 
been led by the inevitable logic of its position to 
imply that the only legitimate source of income for 
any worker is the immediate fruit of labor. All 
income in the form of rents, interest and dividends, 
or other profits of any kind from capital, being it 
affirms, the robbery which capital exacts from labor, 
must, therefore, be cut off. Hence, in the reconstruc- 
tion of our industrial system, Marxism avows its 
purpose to allow no worker to invest any capital in 
the public industries for an income. And the Marxist 

63 



64 Capital and Profits 

method of reconstruction, if rigidly carried out, will 
cut off all possibility of the worker's receiving any 
income from any source except the wages paid to 
labor. All distinction between the wages earned by 
labor and the dividends earned by capital will dis- 
appear. The whole income accruing to each worker 
will be in the form of wages and of wages alone. 
And consequently when the worker stops work all 
income to him shall cease. 

Now this position of Marx is unscientific and 
entirely untrue to the facts of the case. For there 
are two legitimate and even necessary sources of 
income for every worker. And by the term " every 
worker," is meant just what that term signifies. It 
does not signify the plunderer nor the pseudo-cap- 
italist. This book does not advocate the cause of 
the plunderer, but of the worker and the problem 
before us is, how shall the worker, in a rightly re- 
constructed industrial system, get the full fruits of 
his labor? Now a true economic science maintains, 
contrary to Marx, that for every worker of hand and 
brain, for every man who believes in honest work 
for honest pay, there are of right two legitimate 
sources of income, — two sources which the worker 
himself needs clearly to grasp and which our in- 
dustrial administration should ever keep distinct. 

The first of these is the direct earnings of the 
man's labor; and the second is the earnings of his 
capital that is, of the capital which his labor creates. 
The worker who does not recognize this truth is blind 
to his own interests, and blind to his own rights. 

For take the young man who begins life with two 



Worker's Two Sources of Income 65 

hands and two horses. He certainly commands two 
sources of income: first, his hands or ability to 
work, and second, his horses or capital. Each of 
these sources earns for him, we will say, two dollars 
and a half a day. He, therefore, possesses two 
distinct sources of income. And both are legitimate. 

The reality of these two sources and their dis- 
tinction from each other, is seen by carrying the 
illustration a little further. For let us suppose 
that by honest labor the young man produces or 
earns two other horses. These he rents to the 
public and they net him in rentals fifty dollars a 
year. What now are the sources of his income? 
The first source is his two hands, the same as before. 
This source has not increased. But the second source 
has increased. He has now four horses instead of 
two and his income from this source is now one 
hundred dollars a year, just double what it was 
before. And this addition to his income is per- 
fectly legitimate. In receiving it, he robs no one. 
For the whole increase has come from the two 
additional horses which he now owns. 

And as our industries become more and more 
consolidated and socialized, these two sources of 
income become more and more distinct. For this 
great country of ours demands a large amount of 
labor and a large amount of capital. Its farms 
must be tilled, its houses must be cared for, its 
railroads and offices must be filled. Hence, civi- 
lization is everywhere calling for workers, — workers 
of hand and brain to operate all these things. But 
there is also a vast demand for capital. For all 



66 Capital and Profits 

these vast industrial plants must be built, repaired 
and renewed, and their value redistributed from 
generation to generation. There are, it is said, 
one hundred and uwenty billions of dollars invested 
in the capital of this country. No single in- 
dustry can be built by the savings of one man. 
Our industries demand the aggregate savings of the 
whole people. Hence, these vast industries go to 
the vast army of workers, teachers, doctors and other 
professional men and say — " Give us of your cap- 
ital, your savings, and invest them in these vast 
industries, and we will pay you your share of the 
earnings of the aggregate capital invested." And in 
response to this call this vast army of workers in- 
vests its savings in these industries, and if justice 
rules, if our industries are rightly organized and 
justly administered, each investor will receive back 
the just earnings of his share of the capital invested. 
Each person, therefore, will have two distinct sources 
of income, the earnings of his individual vocation 
and the earnings of his invested capital. 

Here, for example, is a young man, a carpenter, 
who receives four dollars a day for his work. But 
he has also invested, say five thousand dollars in 
his country's industries, in its railroads and fac- 
tories. These earn and pay to the investors, say, 
eight per cent, in dividends. Now, that young 
carpenter has evidently two sources of income. The 
first is the earnings of his work as a carpenter, which 
brings him in twelve hundred dollars a year, and 
the second is the earnings of his invested capital 
which brings him in four hundred dollars a year. 



Worker's Two Sources of Income 67 

And both of these sources are perfectly legitimate* 
For the first is the fruit of the work of his hands, 
and the second is the fruit of the work of that cap- 
ital which his labor has created. True economic 
science maintains, therefore, that there are two dis- 
tinct sources of income for every man, and when 
Marxists imply or affirm that there is only one, they 
are implying or affirming what is not true. 



The Second Proposition.— But it is not only 
true that every worker has of right two sources of 
income, namely, the earnings of his labor and the 
earnings of his invested capital, but it is also 
imperative in all partnerships, if we would get 
justice, that we shall keep a separate account 
of the earnings of these two sources for each worker. 
That is, in all partnerships we must keep a separate 
account of the work which each man performs and 
pay him a just wage for his labor, and a separate 
account of the capital which he invests and pay 
him a just dividend on the earnings of his capital. 
By no other method can we secure a just distribu- 
tion of the products or earnings of our common 
industries. 

Marxists have said, " Even granting that capital 
does earn something, why should we keep a separate 
account of it?" " What difference does it make whether 
we pay the earnings of capital, in the form of divi- 
dends or in the form of wages to labor? " Discern- 
ing economists can see that it makes all the differ- 



68 Capital and Profits 

ence in the world. Even a New England school- 
boy can see the difference. 

If, when men go into partnership, all should put 
in the same amount of capital and do the same 
amount of work, it would, indeed, make no difference 
whether we should keep a separate account of the 
labor and of the invested capital of each or not. 
For in that case the earnings both of the labor and 
the capital of each would be exactly the same. All 
that would be necessary, therefore, would be to 
divide the net earnings of the business equally 
between them 

Suppose, for example, that two men should go 
into business together and both put in exactly five 
thousand dollars into the business and both do 
exactly the same amount of work. In that case, 
it is evident that all that would be necessary would 
be to divide, at the end of each month or year, the 
net earnings of the business and justice would be 
done. 

But in very few business partnerships do the men 
all put in the same amount of capital or do the same 
amount of work. Hence, the only possible way to 
get justice is by keeping a separate account of the 
amount of capital which each puts in and pay him 
the full earnings of his share of the aggregate cap- 
ital, and keep a separate account of the amount of 
labor that each performs, and pay him the full 
earnings of his labor. 

Suppose, for example, that two men should go into 
business together and the one should put in five 
thousand dollars and the other ten thousand, and let 



Worker's Two Sources of Income 69 

us suppose that the first works twelve months in the 
year and the other only ten. It is evident that to pay 
those men exactly the same amount from the busi- 
ness would be unjust. In order to get justice, it 
would be necessary to keep a record of the capital 
put in by each and pay him the full earnings of 
his capital, and keep a record of the work performed 
by each and pay him the full product of his labor. 
Let us suppose that the earnings of the capital is 
ten per cent, and that each man's work is worth 
one hundred dollars a month. Then the dividends 
to the first man would be five hundred dollars and 
to the second one thousand. But the wages to the 
first would be twelve hundred dollars and to the 
second, only one thousand. Thus we would obtain 
justice. And this is the method actually employed 
in all rightly organized co-partnerships today and 
it is perfectly fair. 



And under a socialized industrial system — which 
is but a business partnership of the whole people — 
this would be the only method by which to secure 
a just distribution of the products of the system. 

For under socialism, all our industries must be 
capitalized just as under the present system. And 
this capital must be taken, directly or indirectly, 
out of the earnings of the individual workers just 
as today. 

To make this clear and still farther illustrate the 
justice of dividends even under a socialized system, 
let us give an example. Suppose that a small town 



70 Capital and Profits 

containing five hundred voters should adopt the 
public ownership of its water supply. Suppose that 
it should require fifty thousand dollars to capitalize 
the new plant and that each man is called upon to 
subscribe and pay in his due quota, or one hundred 
dollars apiece to provide this needed capital. And 
suppose that each man does this and the new plant 
is duly installed and owned by the whole people 
collectively. 

But suppose that to run this plant it requires the 
work of five men the year round, and that these 
are duly engaged and get to work; and let us suppose 
that the water produced during the year by this 
new plant amounts to eleven thousand dollars, net. 

Now the question arises — to whom does this 
eleven thousand dollars worth of water belong? 
Does it belong solely to the five working men who 
run the plant? Should they receive the whole? 
Marxism says — yes. But is this the true answer? 
No, for each of the five hundred voters in the town 
who have put in one hundred dollars a piece into 
the capitalization of the plant is, in reality, present 
in his invested capital helping to produce the water. 
Each voter, therefore, owns some portion of the 
water produced. 

How much, then, should go to the workingmen, 
the employees, and how much to the investors? 

Let us assume that each laborer's work is worth 
twelve hundred dollars a year. Then according to 
this estimate, each laborer should receive twelve 
hundred dollars worth of the aggregate water pro- 
duced. And the five workers together should re- 



Worker's Two Sources of Income 71 

ceive six thousand dollars worth. The investors 
should receive the rest, or five thousand dollars 
worth of the aggregate. 

But there are five hundred investors. How much 
then should each one receive? Evidently, each 
investor should receive one five-hundredth part of 
this five thousand dollars or ten dollars worth of 
water apiece. For this represents that portion of 
the water which each investor's capital has pro- 
duced and is, therefore, rightfully his. 

But another problem faces us. It is evident that 
each employee of the water-plant cannot live on 
water alone, he does not need twelve hundred 
dollars worth of water per year. If, therefore, he 
is paid in water for his work, he will starve. On 
the other hand, the most of the investors want more 
than ten dollars worth of water per year, and are 
willing to pay for it. While a few who are outside 
of the village or perched on the hills either do not 
want the water at all, or cannot get it. If, there- 
fore, we pay to each investor exactly his ten dollars 
worth of water, the most of them will be under 
supplied, while a few will have what they do not 
want at all. How then shall we adjust this matter. 

Its adjustment is very simple. Instead of paying 
each worker for his work and each investor for the 
use of his capital, in water, we shall take the water 
and sell it to the public, allowing each man to buy, 
at so much per faucet, whatever he wants, much or 
little. The money thus received, or the eleven 
thousand dollars, we shall place in the public 
treasury, and out of it we shall pay twelve hundred 



72 Capital and Profits 

dollars apiece in wages to each employee, and ten 
dollars apiece in dividends to each investor. 

By this method, we shall make it possible for each 
employee and each investor to receive the full 
value of his part of the water produced, but in the 
form of money which he may use as he pleases. 
The employee may use a small part of his twelve 
hundred dollars in paying for the water which is sup- 
plied him by the very corporation for which he 
works. But the greater part will go for other things, 
for food and clothing and other necessities, and a 
part of it may go into a public savings bank. The 
investor may likewise use his ten dollars in paying 
for the water which he has received from the cor- 
poration in which his money has been invested, or, 
if he lives out of town and uses no town water, he 
may use his ten dollars in buying sugar or some 
other necessity or, he too, may lay it by in the 
savings bank. Thus the problem of the just dis- 
tribution of the water belonging to each is solved. 

Now, as we review this illustration, we per- 
ceived first, the nature and the validity of dividends 
even under a socialized industry. For in the ex- 
ample just given, it can be seen that the ten dol- 
lars in dividends paid to each investor, were per- 
fectly just, for this sum represented simply the 
amount of water which his capital produced and, 
therefore, the amount of water which rightfully 
belonged to him. But instead of paying him in 
water, we sell the water to the public and pay him 
the ten dollars instead. And this sum is his divi- 
dend. In like manner, the wages of twelve hundred 



Worker's Two Sources of Income 73 

dollars which goes to each employee, represents the 
amount of water which his labor produced, and, 
therefore, rightfully belongs to him. But instead of 
paying him in water, which he does not want, — 
we sell the water to the public, at a fair price, and 
pay him the twelve hundred dollars instead, so that 
he, too, may use this amount as he pleases. Thus 
we distribute the water according to the needs of 
the public, and at the same time secure absolute 
justice to each employee and to each investor. 

And we perceive the imperative need, in order to 
secure justice all around, of carefully distinguishing 
between the earnings of labor and the earnings of 
capital. We must keep a careful account of the 
capital put in by each man and pay him a just 
dividend on the earnings of his capital. We must 
keep a careful account of the work done by each 
employee and pay him a just wage for the work 
which he performs. And we must keep a careful 
account of the amount of water that each man buys 
and make him pay for what he buys. Thus we 
shall get justice. 

In conclusion, we perceive that this question at 
issue between capital and labor is not a question at 
issue between the exploiter and the exploited classes, 
but between worker and worker, or between one 
kind of work and another kind of work which 
even the same worker may do. That is, it is a 
question between the work done indirectly by the 
worker through the capital which the worker has 
created, and the work done directly by him in 
operating that capital. 



74 Capital and Profits 

When, therefore, in the case just cited, it was 
asked how much of the water should go to the 
hired men and how much to each investor, the 
question was not one between an exploiting and an 
exploited class, but between the relative value of 
the two kinds of service performed by two classes 
of workers. For the voters who put one hundred 
dollars each into the plant were putting themselves 
to that extent into the plant. And the hired men 
were themselves among these investors. The five 
hundred investors performed a service, but they 
performed a peculiar kind of service. Instead of 
working like the hired men through the year for 
the plant, they gave their labor beforehand to the 
harnessing of nature's forces and in making nature's 
forces work for them. And the question merely is, 
— how much should they receive for the service 
which those forces thus harnessed performed? 



CHAPTER VI 

The Principle Determining the Earnings 
of Capital and Labor 

IN the last chapter it was shown that to every 
worker there are two legitimate sources of 
income, namely, first, the earnings of his labor 
and, second, the earnings of his capital. And we 
have seen the importance of keeping, in every 
partnership, the record of these two sources per- 
fectly distinct and then paying each man the full 
earnings of his work, on the one hand, and the 
full earnings of his capital, on the other hand. In 
no other way can justice be attained. 

But this brings us to a most important inquiry. 
It is this. By what principle shall we determine 
the amount of profit to be paid to capital as compared 
with labor? For it is quite difficult, as I have said 
before, to determine offhand, in any given business, 
just what are the earnings of labor on the one 
hand, and what are the earnings of capital on 
the other. If, therefore, we can find the correct 
principle by which to be guided in the matter, we 
shall be greatly aided in solving this problem. 
What, then, is the correct principle to guide us 
in determining the dividends to be paid to capital? 

It is right here where a sound economics must 
again take issue with Marx and all Marxists. For 

75 



76 Capital and Profits 

a sound economics must maintain that the law 
determining the earnings of capital should be the 
same as that determining the earnings of labor, 
namely, its productivity. 

2. 

For what is the law determining how much 
should go to labor? 

In answer to this question, a sound economic 
science will agree most unreservedly with the 
teaching of socialism and say that the amount 
that in every case should go to labor is the full 
product of the labor performed. In other words, 
the law which should govern wages is nothing more 
nor less than the productivity of labor. 

There are people today — economists and others, 
— who will gravely argue that the laborer ought 
to receive at least sufficient to give him and his 
family a support. He should receive enough to 
pay for the cost of his keeping. And those who 
take this position often think themselves to be 
quite generous in maintaining it. And this seems 
to be the idea underlying the " minimum wage 
bill " that is so often advocated. The truth is 
that many persons still view the laborer as hardly 
a human being. He is a sort of lower animal who 
should be comfortably fed and clothed and housed. 
To do less than this would be a species of cruelty 
to animals. But more than this is hardly to be 
required and certainly not to be expected. 

Now one great truth which Marx emphasized in 
his book — Capital — is that the laborer is able to 
produce in a day's work a great deal more than 



How Determine Value of Capital 77 

the bare cost of his support and the support of his 
children. Marx affirmed that the weaver of cotton 
yarn could produce at least twice as much as his 
living came to. And today there are those who 
say that the laborer produces in a day's work 
three or four times more than the bare cost of his 
living. In short, labor produces what Marx called 
a " surplus value " above its cost. 

Now it is a fact that in the past, down to the 
present day, it has been largely taken for granted 
by so-called business men, that the employer has 
a right to appropriate this whole surplus value or 
product of labor — that is, the surplus above the 
bare cost of the laborer's support. The business 
man feels that it is right for him to " make all he 
can " and to grasp all he can. But the laborer is 
to be satisfied if he is paid barely enough to live. 
And if the despotic capitalists of today are willing 
to fix for the laborer a minimum wage by law so 
that the laborer shall not be literally starved to 
death, the laborer is expected to be most grateful 
to those who pass the law. 

Now Marxism comes and declares that the lab- 
orer is a human being; that he is made in the image 
of the eternal as truly as the exploiter who plunders 
him, — that the worker has just as high aspirations 
and just as great a desire for a good home, for an 
education, for an automobile, for music and cul- 
ture, as the plunderer at the top. And Marxism 
declares that the worker of hand and brain, since 
he performs the work of the world, has a right to 
own the world, and that he has a right, therefore, 



78 Capital and Profits 

to receive, not merely enough to live, but the full 
product of his labor, surplus earnings and all. And 
Marxism affirms that the workers should awake 
from slumber and resolutely unite and acquire con- 
trol of the whole industrial world and, dethroning 
the plunderers, they should take to themselves the 
full product of their labor. Now, in all these decla- 
rations, Marx is right and grandly right. And in 
all these things, a true economic science must stand 
with him all the time. In short, a true economic sci- 
ence maintains, with Marx, that the principle that 
should govern society in determining the wages to be 
paid to labor is not the cost of the support of labor 
but its productive power and that the worker should 
in every case receive the full product of his labor. 
It may be difficult to determine offhand just 
what this is. It may be hard to determine the 
relative worth of the man who is slow of mind 
and is able to do no higher work than the handling 
of a spade or plough, and the man who with large 
mind, can superintend a great plant and give his 
whole mind to the task. And yet it is a great help 
towards the solution of the problem, when once we 
grasp the right principle by which to be guided. 
And when we say that every man is to receive the 
full product of his labor, we have taken a great 
step towards the solving of our problem, and with 
experience and discussion, the problem can be satis- 
factorily solved. 

3. 

But what is the reward that should go to capital? 
What is the principle that should guide us here? 



How Determine Value of Capital 79 

It is right here where a true economic science 
must take issue with Marx and all Marxists. The 
common reply which is made by Marxists to the 
question — " How much reward should go to cap- 
ital? " is — " nothing at all." Marxists have been 
asked again and again — " if one man should borrow 
another man's horse for a month or a year, should 
not the borrower pay to the owner a rental for 
its use? " and the reply invariably has been — " No, 
the borrower should merely return the horse at the 
end of the month or year in as good a condition as 
when he received it." 

But certain Marxists have admitted that there 
are conditions when a certain rental on capital 
should be paid. But they affirm that the principle 
that should determine the amount of rent to be 
charged is the bare cost of the thing rented so that 
the man should get back in the aggregate merely 
the equivalent of his labor put into the thing rented. 

To illustrate, suppose that a certain house which 
is offered for rent has cost the owner, we will say, 
just $3,000 in labor. And suppose that it will 
serve the purpose of a dwelling for, say, one hundred 
years. Now, say some Marxists, the rental on that 
house should amount in the aggregate to just the 
cost of its production, or $3,000. And the rental 
per year should, therefore, be just $3,000 divided 
by one hundred, or thirty dollars a year; and this 
is all that the owner can rightfully charge as rent 
on the house. So also in the case of the saw-mill 
cited in a previous page. Suppose that the saw- 
mill has cost the owner of it $5,000; and suppose 



80 Capital and Profits 

that it is able to do service for one hundred years. 
Then, according to Marxism, when the man rents 
it to others, the rent which he has a right to charge 
for the mill is just fifty dollars a year. In other 
words, he has a right to charge such a rental, year 
by year, as shall enable him to get back, in the 
aggregate, merely the original cost of the mill. In 
short, Marxists teach that the principle determ- 
ining the rental to be charged for the use of an- 
other's property is, at most, merely the cost in labor 
of the thing rented. And it affirms that the owner 
has a right merely to get back in rents, in the 
aggregate, the amount of labor which he has put 
into the production of the thing rented. 

Now Marxism enunciates here a wrong principle, 
for that principle which should determine the 
amount of income which a man should receive from 
his capital is precisely the same as that which should 
determine the income to be received from his labor, 
namely, not its cost, but its productivity. 

For, in the first place, capital is able to produce, 
as it has been shown before, far more than its cost 
and care. Marx indeed, has justly emphasized the 
fact that labor will produce far more than its cost 
and support; and this surplus which labor is able 
to produce, Marx calls its "surplus value.' ' But 
capital is also able to produce far more than its 
cost and care. // has, therefore, a surplus value as 
well as labor. A cow, under proper conditions, will 
produce far more in milk and veal than the cost 
of her raising and keeping. A team of horses will 
do far more work than the mere equivalent of the 



How Determine Value of Capital 81 

labor expended in their production and use. A 
steam locomotive will probably do a hundredfold 
more service in the aggregate than the equivalent 
of the labor put into its creation and employment. 
And a saw-mill that will cost five thousand dollars 
will produce, in net results, say, ten times more 
than its cost or, say, five hundred dollars a year. 
There is, therefore, a surplus value to capital as 
well as to labor. Indeed, as I have shown, it is 
because capital is able to yield a return far in excess 
of its cost that men go to the labor of creating and 
employing it. 

Now, just as Marxists rightly insist that the 
wages paid to labor should be governed not by the 
cost of labor but its productivity, and just as 
they rightly insist that every worker should receive 
the full product of his labor, however great that 
may be, so a true economic science must maintain 
that the earnings of capital should be governed not 
by the mere cost of the capital, but by its produc- 
tivity. And as the worker should receive the full 
product of his labor, so also the creator of capital 
should receive the full product of his capital. 

Hence, for a group of men to say to the owner 
of the saw-mill — referred to before — " We will pay 
you in rental per year merely the proportional 
equivalent of the labor which you have put into 
the mill and we, who have done nothing toward 
the creation of the mill, will appropriate all the 
surplus earnings of the mill," — would be sheer 
robbery. And it would be precisely the same kind 
of robbery as when the capitalist today robs the 



82 Capital and Profits 

worker of the surplus earnings of his labor. And 
if the mill was able to produce a net earning of 
five hundred dollars a year, to pay the owner fifty 
dollars would result in robbing him of four hundred 
and fifty dollars a year. 

The fact is that the owner created the mill to 
earn an income from it. While, therefore, the men 
who rent the mill have a right to receive the full 
product of their labor (and skill) employed in 
running the mill, yet the owner has the right to 
receive the full product of the earnings of the mill. 
Any other position is robbery. 

The truth of this position is confirmed by con- 
templating the effect of adopting the reverse idea. 
For suppose that we should adopt the Marxist 
law that all rentals and dividends are to be de- 
termined not by the productivity of the capital 
or the service rendered but by the cost of the cap- 
ital rented or employed, and what will be the 
result? The result will be that utilities that differ 
greatly in value yet happen to have cost the same 
amount of labor in their production, will receive 
the same rental. Here for example are two houses 
the cost of which has been exactly the same; but 
the one is a far better house and better located than 
the other. Now according to Marx, the man who 
rents the poorer house should be compelled to pay 
the same rental as the man who lives in the better 
house. Will this be fair? Will the man in the 
poorer house stand for it? Here are two horses in 
a public livery. Both have cost the same amount; 
but the one is swift, gentle and trustworthy; the 



How Determine Value of Capital 83 

other is slow, vicious and tricky. And yet, accord- 
ing to Marx, the man who rents the bad horse 
should be compelled to pay the same rental as the 
man who drives the better horse. Will humanity 
submit to this treatment? No. The world will 
say that the man who lives in the better house must 
pay the larger rent and the man who drives the 
better horse must pay also more than the man who 
drives the poorer horse.- And all will say that in 
all cases the pay should be determined not by the 
cost of the thing used, but by the relative service 
which it renders. In other words, the pay which 
capital should receive should be determined not by 
its cost but its relative productivity. 

It must be admitted that there are certain real 
difficulties in the application of this principle to 
capital which must be taken into account. The 
subject of the actual reward of both capital and 
labor is more complex than at first may appear. 
But it can be shown that the same difficulties 
occur in the application of the principle to labor 
as to capital and that the one is not more complex 
than the other. And it can be shown that what- 
ever be the considerations and perplexities entering 
into the determination of the value of either, the 
fundamental law lying behind these considerations 
and perplexities and determining the value of each 
is its productivity. 

It is a fact, therefore, that the same ultimate 
principle determines the reward of capital as the 
reward of labor. And since that man who performs 
a certain amount of work for humanity should 



84 Capital and Profits 

receive in return the full product of his labor, so, 
for the same reason, the man who creates a certain 
amount of capital for the use of humanity has a 
right to receive in return the full value produced 
by that capital. And when Marxism declares that 
the worker has a right to receive the full product 
of his labor, but not the full product of his capital, 
it is taking an illogical, a self-contradictory and an 
unjust position — a position that will make the 
remedy of present wrongs an impossibility. 



CHAPTER VII 

The Practical Utility of Capital and 
Dividends 

THIS fact, that capital is productive and is a 
legitimate source of income to the worker, dis- 
tinct from labor, is no mere abstract proposition, of 
academic interest only. It is a fact of supreme 
practical importance. And instead of being over- 
looked and, worst of all, deliberately eliminated 
as Marxism affirms, it should be most carefully 
preserved. For this fact has given birth to one 
of the most important factors in our economic 
life — a factor which lies at the very foundation of 
civilization and progress. For it is this fact that 
provides the way by which each worker can in- 
crease his income from year to year, win economic 
leisure, enlarge the realm of human life and happi- 
ness a thousandfold, and prepare for sickness and 
old age. 

In support of this affirmation it can be shown, 
first, that it is this productivity of capital that enables 
man to increase his present income a hundredfold, 
and lays the foundation of civilization. 

Human labor alone, that is, human labor unassisted 
by developed capital, can produce and acquire very 
little. Throw any man upon this earth anywhere 
with no machinery, no tools, without even a club 

85 



86 Capital and Profits 

or bow and arrow, and what can he achieve? In 
his bodily powers alone, man is less equipped for 
the struggle for existence than almost any one of 
the lower animals. The squirrel, the bird, the ox, 
are each better fitted to make a living than man 
when he is unassisted by tools, land, and machinery. 
And this is why the life of the savage is so meagre 
and precarious. The savage knows little or nothing 
of harnessing nature's forces and making them 
work for him. He knows almost nothing about 
tilling the soil and making it productive. He 
knows nothing of harnessing the stream to turn 
the mill. He knows nothing of the power of steam 
and electricity. He knows almost nothing of the 
use of timber in the structure of his houses and 
other buildings. Hence, the life of the savage is 
destitute and hard. He has occasional feasts with 
long periods of starvation. He broils in the summer 
and freezes in the winter. The earlier Arctic ex- 
plorers found a tribe of Esquimaux, about two 
hundred in number, living on a narrow strip of 
land on the west coast of Greenland north of the 
Humbolt glacier. During the short summer, when 
sea birds flock to that coast in millions for nesting 
purposes, the tribe feasted in plenty. During this 
season an Esquimau woman could go out and 
catch, in a few minutes, enough birds and eggs to 
furnish a feast for her family, as easily as a New 
England woman could go into her garden in the 
summer, and gather enough vegetables for a gener- 
ous dinner. But when winter came and the birds 
had departed, not a few of the tribe frequently died 



Utility of Capital and Dividends 87 

of starvation. And yet, if the Esquimau only 
knew, he had a cold storage plant, in the vast 
glaciers at his very door, in which he could store 
away enough dressed birds to keep him supplied 
with an abundance of food the year round. Mr. 
Mackay, industrial missionary to the natives in Cen- 
tral Africa said that the inhabitants of that region, 
when he first went among them, knew nothing 
of the use of so simple an instrument as the lever. 
They did everything by mere brute strength. If 
they desired to move a stone, they applied their 
naked hands to it and sought to lift it by mere 
brute force. 

And even in civilized lands, the chief cause of 
the poverty of a large number of workers is the 
fact that they seek to live by mere crude labor 
alone. They know nothing of the saving and the 
investing of their savings for an income. They 
work and they spend at once, all the fruit of their 
work. Many seem never to have obtained the re- 
motest idea of saving and investing for an income 
aside from that of labor. The result is that their 
lives are like that of the savage, meager, insufficient 
and they are tied to the yoke of toil like a slave 
to his task. 

Furthermore, he who depends upon the work of 
his hands alone for an income, cannot hope to secure 
any great increase as the burdens of life grow heavier. 
It is evident that as a man grows older and his 
family increases in number, he needs a larger in- 
come. But the man who depends upon his two hands 
alone for a living, can scarcely hope to see his 



88 Capital and Profits 

income greatly increase. For man begins life with 
just two hands and he ends life with just two hands. 
He cannot increase their number. On the contrary, 
he may lose them by accident or sickness. It fol- 
lows, therefore, that if a man is dependent upon 
his two hands alone for support, his life must be not 
only meagre from the beginning, but there can be 
no hope of an increase of income with the increase 
of burdens. And he is liable, at any time, through 
the loss of his hands or by sickness, to lose even 
this meagre means of support and be compelled to 
come onto charity or die. 

Now how does nature provide a way by which 
each man can obtain an abundant support and 
secure an increasing income with the increasing 
years? I reply — through the productivity of capital, 
that is, through the harnessing of nature's forces and 
making them work for him. 

To the untaught savage who starves and shivers 
for one-third of the year and never knows what 
real abundance is, nature says — " Lift up your 
eyes and behold these vast productive agents in the 
world around you, — these fertile fields, which, when 
rightly tilled, will yield a hundredfold, — these streams 
which will turn your mill — these productive powers 
of steam and electricity — these forests which will 
build your homes. Acquire the mastery of these 
things, make them work for you, and your life will 
no longer be meagre and destitute. For these forces 
of nature will give you an ever increasing income 
with the increase of the years." 



Utility of Capital and Dividends 89 

And to the workers of today civilization gives 
the same message. " Do not trust to work alone 
for the supply of your needs." — she cries — " Invest 
a part of your earnings in the capital of your coun- 
try and reap your share of the income from that cap- 
ital." The capital of America amounts to one 
hundred and twenty billions of dollars in gold and 
it embraces lands, railroads, factories, homes and 
so forth. Now civilization cries to each man and 
woman — "Acquire or create your just share of this 
capital. Reap your just share of its earnings and 
you will greatly increase your income from year to 
year and have abundance." 

And every man can do this and yet commit no 
robbery against his neighbor. When a man takes 
up a piece of land and brings it under cultivation 
and so makes it work for him, — when he adds to 
the land flocks of poultry and herds of cattle, when 
he builds upon it water- works and an electric motor 
and thereby increases the sources of his income a 
hundredfold he certainly robs no one, for all the 
increase in his income is derived from the increase 
of the capital which his labor has created. And 
when a man puts, year by year, a part of his sav- 
ings into his country's industries and thereby adds 
to the number of its locomotives, or the amount 
of its cultivated land, or the number of its herds 
of cattle, and so greatly increases his income, he, 
too, robs no one, for all the increase comes from the 
factories, the railroads, the farms which his labor 
has created or helped to create. 



90 Capital and Profits 

2. 

But the productivity of capital not only increases 
a man's present income, but it enables him to pre- 
pare for what may be called the third great period 
of life and it enables him then to enjoy economic 
leisure, enter a larger and freer life and enjoy a happy 
old age. 

Every man's life embraces three great stages or 
periods, — and this is a fact which Marxism over- 
looks. The first stage includes childhood and youth, 
or the stage of dependence, education and training. 
It embraces the first twenty years of life. The 
second stage is the stage of adult manhood and 
womanhood. During this stage each man and 
woman is called upon to put his and her shoulder 
to the great tasks of life. They must perform its 
labor, provide for its necessities and bear the yoke 
of responsibility. During the years of childhood 
and youth they were supported and cared for by 
others. Now they must not only support them- 
selves but they must, in their turn, support others. 
They must bear and support their own children, 
tenderly care for the sick and the aged; they must 
toil in the fields, run the factories, teach the schools, 
run the government, and train the world in right- 
eousness. All this work now rests upon their shoul- 
ders, and they cannot run away from it. And yet, 
if humanity is rightly trained and society is rightly 
organized, this period is not a grievous one. Far 
from it. It is a period of glorious achievement and 
hope. For, during this period, they are laying 
foundations for themselves and their descendants. 



Utility of Capital and Dividends 91 

They are raising their children, caring for their 
parents, building up society, learning self-control, 
laying the foundations of independence and greater 
usefulness, preparing for old age, and learning the 
ways of the eternal. This second period lasts, say, 
from twenty to forty-five years of age, when the 
next period begins. 

The third period is, or should be, the period of 
economic leisure and independence, ending with the 
gentle decline of old age and death. This period 
is not necessarily one of idleness. Indeed, it may 
be one of the greatest activity and usefulness to 
society. But it is, or should be, a period when the 
man is no longer tied like a slave to his post. It 
should be one of economic independence and, there- 
fore, one when the mind dares to speak out its own 
thought. It is a period when the man and his wife 
should be able to take the time and leisure to travel, 
to visit scenes of which they have read, to give 
themselves to study and research, to inventions and 
to a larger social service, if they so desire. 

Now, how does nature provide for this third 
period of life and secure for each generation eco- 
nomic leisure and a well-protected old age? To 
this question I reply again, that this third period is 
provided for through the productivity of capital. 

For capital is not only able to produce far more 
than its cost and greatly increase one's present 
income, but with a little care, it is able to continue 
to produce far more than the cost of its care and 
operation for years to come. To illustrate. It 
costs no little labor to install an electric plant on 



92 Capital and Profits 

one of our streams. But when the plant is once 
installed, it will continue to create for years after- 
wards electric light and power, far beyond the cost 
of its operation and care. It costs no little labor 
to rear a good herd of cattle. But when that herd 
is once reared and properly fenced in, the herd will 
not only sustain itself by natural reproduction, 
but it will also produce in milk and meat and hides, 
far more than its care and operation amount to. 
The same truth holds in relation to hundreds of 
other forms of capital. Indeed, there are forms of 
capital so enduring, that they continue to be pro- 
ductive long after the generation which created 
them is laid in the dust. A good part of the capital 
which the present generation is now using was 
created by our predecessors. 

Now it is this peculiarity of capital which sup- 
plies a way by which each thrifty man and woman, 
and each generation can provide for the third period 
of life and prepare for economic leisure and old age. 
Namely, by creating, during the second period, an 
amount of capital sufficient not only gradually to 
increase their income during the second period, but 
also to care for the third period and thereby free 
themselves from the slavery of toil. To do this 
requires, indeed, foresight; and it will be neces- 
sary to make the teaching of foresight to be one 
of the important tasks of school life. But foresight 
is not a virtue to be despised. It is a good thing 
to cultivate. And if we will only be careful to 
cultivate this virtue in our young people and prop- 
erly organize our industrial system, every man and 



Utility of Capital and Dividends 93 

woman can win for himself and herself an abun- 
dant support for the third period of life and secure 
economic leisure and a happy and well-protected 
old age. They will be able even to leave behind 
them a large amount of capital for the use of the 
succeeding generation and thereby enable the new 
generation to begin life on a higher level and with 
a greater advantage than the preceding. For there 
is, in reality, no limit to the amount of capital 
which humanity can create — if once it awakes and 
comes to know the powers contained in nature's 
forces all around it; and, above all, if it comes to 
know that the true method of living is not by 
work — as Marxists teach — but by harnessing na- 
ture's forces and making them work for us. For, 
already, we are learning that there are potential- 
ities of production in the soil of which we have 
not yet dreamed. There are forces all around us, 
electric and otherwise, which are able to do for 
us " exceeding abundantly above all that we ask 
or think." And when humanity once awakes to the 
existence and value of these forces and when we 
reconstruct our industrial system so as to bring 
co-operative effort with justice and equal protection 
to every soul in the acquisition and use of these 
forces, there shall be no limit to the material pros- 
perity which we shall be able to achieve, and every 
man and woman shall enjoy. 



CHAPTER VIII 

The True Economic Basis of Life 

THIS truth that capital is productive and that 
it is the source of economic leisure and inde- 
pendence, brings us to one of the most important 
questions in this whole discussion. // is this. What 
is the true economic basis of human life? Does it 
consist solely in work and wages, as we are so 
often taught and is it really true that mere phys- 
ical labor is, as it is often implied, the most honor- 
able thing in human life? Furthermore, is the 
mere worker to be honored above the capitalist? 
Or is capital the fundamental basis of human life, 
and is the capitalist, indeed, as we all instinctively 
acknowledge, the more honorable of the two? 

Now Marxism (and that means nearly every mem- 
ber of the socialist party today), affirms, and affirms 
with great positiveness, that the sole economic basis 
of human life is labor. It explicitly avows this posi- 
tion in all its teaching, For it affirms, as it has 
been frequently said in the preceding pages, that 
labor produces everything, that capital produces 
nothing, and that all profits are robbery, — the 
robbery committed by capital against labor. And 
it declares its deliberate purpose to abolish all 
possibility to live by invested capital from the 
whole of human life. 

94 



True Economic Basis of Life 95 

In short, Marxists affirm that the sole economic 
basis and the sole honest basis on which human 
life can rest is labor and not capital. It declares 
that the man who seeks to live by work alone, who 
never, therefore, "stoops to the wicked method of 
investing capital for a profit/ 1 who never builds a 
house to rent, nor invests a dollar in a railroad 
for dividends, — he is the only honest man; and he 
alone is seeking to build his life upon the true and 
honest economic basis. The capitalist — that is the 
man who seeks to acquire capital and live on his 
capital is not only building upon a false economic 
basis, says the socialist, but he is a thief and a 
robber and is to be despised. Such is the answer 
which Marxism, in fact, gives to the inquiry — 
" what is the true economic basis of human life? " 

2. 

Is this answer the true one? No. For a review 
of the discussion contained in the preceding pages 
shows most clearly that the true economic founda- 
tion of human life does not lie in mere labor, as 
Marxists teach. It does not lie in mere working 
and devouring the fruit of one's labor. The true 
economic basis of life lies in the harnessing of nature's 
forces, which exist all around us and making them 
work for us. In short, the man who has obtained 
a true insight into the right method of making a 
living and providing for one's material needs is not 
the laborer, who works and eats and eats and works 
like an animal, but the capitalist. 

Of course, in order to harness nature's forces and 



96 Capital and Profits 

utilize them we must perform some labor; and so, 
we must, indeed, work in order to live. But work 
is necessary only as a means to an end, and that 
end is not merely to live and eat, but to master 
nature's forces so as to make them work for us and 
thereby free ourselves from the slavery of toil. In 
other words, we work for the anomalous purpose 
that we may live without work. We work while 
young that we may not work while old. We work 
that we may live on the proceeds of the capital 
which our labor has harnessed and made to work 
for us. 

That this is the true method of living and the true 
economic basis of life comes to us with the force 
of a revelation when we once view the several 
vocations of life, and ask what is it that each man 
is actually doing in his particular vocation? Take 
the skilled and successful farmer. What is he 
really trying to do? The thing which the intelli- 
gent farmer is really trying to do is not to live 
like the wage-earner by work, but to harness na- 
ture's forces and make them work for him. He 
harnesses the forces in the soil, the air, the stream, 
the rain, the sun, the trees, the horses, the hen, 
the cow and even, in modern times, of electricity 
and seeks to make them work for him; he hopes 
to reach the time when these agents will support 
him without the slavery of toil. Take the man 
who builds a boat and sails across the lake? What 
is he doing? He too is seeking to harness the winds 
and the water and make them work for him. In- 
stead of walking around the lake or even of rowing 



True Economic Basis of Life 97 

across it, he throws up a sail to the breeze and he 
makes them bear him across. All he does is to 
hold the tiller and guide the boat. Another man 
builds a house and lives in it and his vocation is 
to build houses for the community. What is he 
really doing? He is harnessing nature's agents in 
wood and stone and making them minister to 
human comfort. And so a study of every material 
industry will show that it has this object in view — 
the harnessing of some one or more of nature's 
agents and making them work for man and to sup- 
ply every material need, with as little labor as 
possible. 

We; perceive, therefore, that the chief factor in 
human life is not muscle but mind, and the chief 
use of the mind is not merely to skilfully direct 
the muscles in labor, but to penetrate into the 
elements of the forces around us and learn how to 
corral them and utilize them in the place of human 
muscle and compel them to do a thousandfold more 
than human muscle can ever do. And the chief 
object on which we should fix our eyes in all our 
toil for our physical needs is not mere work and 
wages, but nature's forces, or capital, in short. 
And our constant study should be how to utilize 
nature's agents and so master them as to lift us 
above dependence upon mere brute labor and our 
own uncertain powers alone for a living. 

And every man should individually own and be 
master of his due share of these material agents that 
have been harnessed for the use of man. Each man's 
life, in fact, should be rooted and grounded in the 



98 Capital and Profits 

acquisition and secure possession of his due share 
of the wealth of the country. His due share may 
be represented by private property or the owner- 
ship of "stocks" or invested capital. But he must 
own and be master of his just portion. And he 
must know and feel that such just portion is truly 
and securely his. 

It is this that constitutes the chief economic 
basis of life. It is this that gives real economic 
security and makes the soul strong in courage. It 
is this that creates real independence of mind and 
secures one from dangerous persecution. It is this 
that creates individual sovereignty and makes a 
man " a man and master of his fate." 

When, therefore, Marxism (and that means 
practically the whole Socialist party), exalts mere 
labor as the only economic basis of life, and con- 
demns all profits as illegitimate, it is not only un- 
scientific in its economic teaching, but it is retarding 
the emancipation of labor which it professes to help. 
For the chief cause of the poverty of the proletariate 
is the fact that he has little more knowledge of 
the true method of making a living than the herd 
of cattle that browses upon the plains. He knows 
nothing of the use and necessity of capital. He 
works to eat and eats to work — with little more 
intelligence than an ox. And this is the primal 
cause of his poverty. For this ignorance will not 
only of itself keep the proletariate poor, but it is 
this ignorance regarding the use of capital that 
enables the astute to victimize him and his chil- 
dren. For the astute and the sagacious knows not 



True Economic Basis of Life 99 

only .how to harness nature's forces and make 
them work for him, but he also knows how to 
take advantage of the ignorance of the worker, and 
harness him and put him in beside the ox and the 
horse or the machine, and exploit him as well as 
the ox, the horse and the machine. And the worker, 
densely ignorant, often does not even know that he 
is exploited and plundered, or, if he does, servile in 
mind, he thinks it all right that he should be exploited 
and plundered; his very religion sometimes seems 
to teach him this. And this servility of mind seems 
to belong not merely to the wage earner, but to 
many other classes who lay claim to greater in- 
telligence. 

What, therefore, the worker needs in order to 
secure his emancipation is, first of all, a true view 
of both capital and labor. He needs also to develop 
that independence of soul that will make him stand 
up for his own rights. He must come to know the 
true economic basis of life, namely, the acquisition 
and secure possession of capital. And he must 
insist that he shall have equal opportunity to place 
his life upon the same capitalistic basis as every 
other man. And he must be induced to join with 
his fellow-men in introducing a new system which 
will make this forever possible. 

3. 

If, now, we have correctly unfolded the function 
and place of capital and profits in our economic 
life, we may fitly conclude this chapter and this 
part of this book with a few important observations. 



100 Capital and Profits 

First, it can be seen that the legitimacy of profits 
or dividends is no mere abstract doctrine, but a 
principle of the greatest practical importance. For 
we perceive that to acquire capital, on the part of 
every worker and to base his life upon the acquisi- 
tion of capital, is not only right, but a fundamental 
duty which he owes to himself and family. And 
we see that the crowning service to be performed 
by our industrial system — even under socialism — 
is, or should be, to enable every worker of hand 
and brain — everyone who performs an honest ser- 
vice for society, to acquire and invest his savings 
in his country's industries and thereby free himself 
from the slavery of toil, for this is to build the 
individual life upon the only true economic foun- 
dation. 

Second. It can be seen that the service which, 
even under socialism, our industrial system must 
perform for each person is threefold. First, it must 
provide him with work at a just wage; second, it 
must supply him with needed utilities of a good 
quality at a fair price; and third, it must provide 
him with a place where he can invest his savings 
in his country's industries with safety, profit and 
permanency, make them work for him and thereby 
free himself from the slavery of toil. 

No system that fails to perform any one of these 
three functions can meet the demands of the thrifty 
and industrious. And the last function must in no 
case be omitted; for that, as it has been shown, 
crowns and completes the other two. When, 
therefore, Marxists imply that our industries should 



True Economic Basis of Life 101 

serve just two ends in relation to the individual, 
namely, first, provide him with work at a just 
wage, and second, supply him with all utilities at 
a fair price, they commit a fatal error. And they 
show that they have not carefully analyzed the 
several elements of that service which our industries 
should perform. For they omit that function which 
is most important and crowns and completes the 
other two. 

Third. It can be perceived that in order to 
justly distribute the fruits of our common indus- 
tries even in a socialized industrial system we must 
call for the individual investment of capital and pay 
dividends. Human society must, in short, be organ- 
ized by some right method, into a great industrial 
co-partnership, or business corporation in which 
each man shall be called upon to subscribe his 
quota of the needed capital and earn his share of 
the dividends. And we perceive that it will be 
imperative not only to keep a careful record of 
each man's work and pay him the full earnings 
of his labor, but also a careful record of the capital 
which each man invests and pay him the full earn- 
ings of his capital. By no other process can we 
preserve for capital, even under socialism, its great 
function of providing for each worker the means of 
securing for himself economic leisure and of pro- 
viding for sickness and old age. And by no other 
way can we bring economic justice to every soul. 

Fourth. We perceive the imperative need of 
arousing the worker and enlightening him in rela- 
tion to these great truths. The trouble with the 



102 Capital and Profits 

worker is that he is in a condition of profound 
economic slumber. He knows nothing of the pro- 
ductivity of capital and its important function in 
each man's economic life. He does not see the 
necessity of the people's being collectively master 
of the business world. He, therefore, blindly per- 
mits the astute business man to own the business 
and thereby expropriate the worker of the capital 
which the worker creates and then to appropriate 
the dividends which the worker, of right, ought to 
receive. The amount of capital which each average 
worker in America creates today by his labor is 
from five hundred to six hundred dollars a year. 
That thrifty worker, therefore, who has reached 
the age of forty-five or fifty years, has created in 
the aggregate fifteen thousand dollars' worth of 
the capital of this country. 

That sum represents, therefore, the amount of 
capital which every thrifty man — and that means 
seventy per cent of the workers — ought of right 
to possess in the United States today. And on 
that amount he ought to receive a dividend, at 
least, of fifteen hundred dollars a year, over and 
above his wages. And yet, in all probability, not 
one worker in ten thousand owns, at fifty years 
of age, fifteen thousand dollars worth of capital 
nor is he receiving the fifteen hundred dollars of 
dividends that are his due. And why is this? Are 
the workers lazy and thriftless? No. Is it because 
their wives are not economical? No, for they do 
not spend that amount. What then is the cause? 
The cause is simply this. The workers are in a 



True Economic Basis of Life 103 

condition of economic slumber and they permit the 
astute to acquire and own the plant and thereby 
to hold all power of control within their hands. 
The astute then proceed to rob the worker of the 
very capital which the worker creates and to ap- 
propriate the dividends which the worker's capital 
earns. And the worker does not know how the 
trick is done. 

And what we need in order to remedy this wrong 
is not to abolish dividends, as Marxists demand, but 
to enlighten the workers in relation to this great 
wrong and move them to combine with their fel- 
low citizens and so reconstruct our industrial sys- 
tem and acquire such collective ownership of the 
plant, that they shall be able to retain possession 
of that capital which their labor creates and re- 
ceive the dividends which their -capital earns. In 
no other way can we get justice and meet every 
economic need. 

Fifth. It can be affirmed that capital, as well as 
labor, sustains a twofold relation to our industrial 
and economic life. In the first place, it is one of 
the two necessary agents of production. It is an 
essential factor in every function of civilization, and 
some one must create it or civilization will perish. 
In the second place, capital, like labor, performs 
a function in relation to each worker's life. Like 
labor, it is a necessary source of income to each 
worker. It is the agent by which each worker 
provides or should provide leisure for himself, secure 
a larger income and provide for sickness and old 
age. And this relation of capital to each individual 



104 Capital and Profits 

man is of supreme importance and should in no 
case be ignored or abolished. 

4. 

Finally, from the preceding it can be seen that 
there is no contradiction between the idea of our 
industries existing for service and the payment of 
dividends on invested capital. 

It is a common saying of Marxist socialists that 
" our industries should exist for service and not for 
profit," as if there was a contradiction between 
these two. Socialist speakers will devote a whole 
lecture of an hour and a half in length showing 
how in our present industrial system every industry 
is used for profit. How " the grocery man comes 
to your door not to perform a service but to make 
a profit;" and "the real estate agent sells you a 
house for profit;" and " the doctor comes and 
doctors you for a profit;" and " the minister mar- 
ries you for a profit;" and " when you die the 
priest buries you for a profit." And you cannot 
get into heaven without paying the church a fee 
or profit to get you in. Thus, everything is done 
for a profit and the worker is gouged, say the Marx- 
ists, at every point. 

Now, without doubt there is much truth in this 
accusation. It is, indeed, true that our present 
civilization is still largely individualistic and based 
upon the policy of a free-fight-for-all. And this 
results in the placing of the individual and selfish 
motive behind all conduct. There is no doubt 
that business men, politicians, lawyers and doctors 



True Economic Basis of Life 105 

and even clergymen are too often, in this individ- 
ualistic age, swayed by the individual and personal 
motive rather than love of the universal good. 

But, while admitting that this is so, it is not true 
that this individualistic motive springs from the 
fact that we pay rents, interest and dividends on 
capital as Marxists teach. And there is no con- 
tradiction between the most unselfish administra- 
tion of industry for service and the most emphatic 
insistence on the payment of dividends on capital. 

For take the water-works referred to before. 
That plant was built by the public for service, 
namely, to supply all the people with water, and 
all can see that it actually performs this service. 
And yet we can feel that it is perfectly just 
and necessary to pay dividends on the capital 
invested, even as it is just to pay wages to the 
workers who run the plant. For certainly all can 
see that it is just to pay wages. For the men who 
give their service to the public in running the 
plant have a right to receive a just recompense for 
the service which they render. So also we can see 
that dividends are perfectly just, though the plant 
is employed for service. For the dividends which 
each investor receives are nothing but the recom- 
pense for the service which his capital performs. 

Socialist orators, misled by the Marxist teach- 
ing, speak sarcastically of the groceryman and the 
doctor and the lawyer who all work for a profit. 
Well, what does the Marxian socialist orator want? 
Does he expect that the groceryman and the doctor 
and the lawyer are to work for nothing? The 



106 Capital and Profits 

Marxist socialist insists with great emphasis that 
each worker, that is, each factory hand and mechanic, 
plumber and carpenter, shall receive the full pro- 
duct of his labor, but when it comes to the business 
man, the groceryman, the doctor and the preacher, 
it seems that they must work for nothing. And the 
man who takes thousands of dollars out of his 
earnings to capitalize the industries of the country 
must receive absolutely nothing for the service 
which his capital renders. Is this just? 

There is no contradiction, therefore, between the 
idea of industry for service and the payment of 
wages to labor on the one hand and dividends to 
capital on the other. For the wages paid to labor 
and the dividends paid to capital are nothing but 
the just recompense for that service which each 
performs. They are the just division of the common 
product of the labor and capital contributed by each. 
And just as the carpenter has a right to receive a 
just wage for his services in building a house, so 
the man who puts money into a railroad for the 
building of the road, has a right to receive a just 
dividend for the service which his money performs. 
Furthermore, the wages paid to labor and the divi- 
dends paid to capital are nothing but the measure 
of that service performed by the worker on the one 
hand, and the investor, on the other. 

While, therefore, the Socialist motto — " Indus- 
try for service and not for profit," contains a great 
truth yet, like nearly all Socialist mottoes, it con- 
tains also a great error. For while each plant 
should exist for service and not to make an unjust 



True Economic Basis of Life 107 

gain of another, yet it is also true that to each 
worker it is right to pay a just wage for his work 
and to each investor a just dividend for the earn- 
ings of his invested capital. 

The motto above referred to is, therefore, 
wrongly worded. Instead of reading as given by 
Socialists, it should read — "Industry for service and 
not for unjust gain;" or — "Industry for service and 
not for plunder;" or — "Industry for the benefit of 
all and not for the few alone." The people are not 
to be viewed as a mere field to be worked, harvested 
and plundered for the benefit of the few. 

And while we should cultivate a less selfish mo- 
tive in the industrial world, and our great industries 
should be created for service, and while a rightly 
socialized system will greatly help to nourish this 
unselfish motive, nevertheless, it is not only right 
but our duty to insist that each worker shall receive 
the full product of his labor and each investor the 
full product of his capital. In no other way can 
we secure the just distribution of the products of 
our common industries. And in the reconstruction 
of our industrial system, what we need is not a 
system that will abolish, as Marxists teach, all 
wages and all dividends and introduce a mere com- 
munistic policy which is fit only for unintelligent 
animals, but a system that will make every man 
equally responsible both for the necessary work and 
the needed capital of the country, and will, at the 
same time, give to each man the full product of 
his labor, on the one hand, and the full product 
of his invested capital, on the other. 



PART IV 

Effect of the Marxist Economics 

— Pensions — The True Cause 

of Industrial Wrongs 



CHAPTER IX 

The Actual Effects of the Marxist 
Economics, if Rigidly Introduced 

HAVING pointed out the scientific errors of the 
Marxist system of economics, it will be profit- 
able to inquire as to the actual effects of that system, 
if it is once rigidly introduced? 

The effects of the Marxist economic system, if 
rigidly introduced, will be to make an equal division 
of unequal earnings. It will rob the older worker 
of all the capital which he creates; and make it 
impossible for nine-tenths of the race to make 
adequate preparation for sickness, economic leisure 
and old age. The truth of this affirmation is seen 
upon a little study of the subject. 

For first, under the Marxist system capital will 
have to be raised just as today. Marxists frequently 
say, " under socialism capital will be abolished." 
But capital cannot be abolished except by the 
abolition of human life itself. For under socialism 
we will be obliged to own farms, factories, railways, 
homes and so forth, just as today. And these must 
be capitalized. Indeed, it is these things that con- 
stitute the capital of the country. Now how under 
Marxism, is all this capital — which amounts to 
one hundred and twenty billions of dollars in gold, 
— to be raised? Marxism may by confiscation, take 

111 



112 Capital and Profits 

over all this capital today and so get rid of raising 
any new capital just now. But all this capital is 
all the time wearing out. Hence, it will have to 
be renewed. It will not be long before repairs shall 
have to be made and hence new capital shall be 
needed. And so, sooner or later, the whole plant 
of civilization shall have to be renewed or recreated 
and new plants shall have to be built. The result 
will be that practically the whole capital of the 
country shall have to be recreated from generation 
to generation, just as today. 

Now how, under the Marxist system, will all this 
capital be raised, and when new plants are to be 
created — new railroads to be built and new facto- 
ries to be constructed, where is the needed capital 
to come from? 

Under the dividend-paying system this capital 
will be raised directly and openly by calling upon 
each citizen to subscribe his due quota from year 
to year. A careful record will also be kept of the 
amount invested by each, and dividends shall be 
paid to each investor to the full earning capacity 
of the capital invested, and so justice shall be 
done. But how shall all this capital be raised, 
from year to year, under the Marxist system? 
Marxism will raise this capital, say its advocates, 
"by taking it out of the business as we go along." 

But what does this mean? It means that every 
worker will be compelled to pay in his due quota 
of the capital required just as today, only he will 
be compelled to pay it in surreptitiously and no record 
of it will be kept and no credit given. In other words, 



Actual Effect of Marxist Economics 113 

the government will abstract by stealth from the 
earnings of each worker, an average of five hundred 
or six hundred dollars a year, for this is the amount 
needed from each to supply the aggregate capital 
of the country. And at forty-five or fifty years of 
age, each worker shall have put in fifteen thousand 
dollars. Thus, under Marxism, each worker will 
be required to provide his quota of the capital, year 
by year, just as surely as under the dividend-paying 
system, only under Marxism no record of it shall be 
kept and no dividends shall be paid. 

But what will be the situation or condition which 
this law will inevitably create? It will inevitably 
create this condition. Different men at different 
ages shall have supplied different amounts of the 
invested capital of the country. Thus, the young 
man at twenty, since he shall not, at that age, 
have performed any labor, shall have created noth- 
ing of the aggregate capital of the country. But 
on the other hand, the man who has arrived at 
fifty years, shall have created in fact fifteen thousand 
dollars' worth of the aggregate capital of the coun- 
try. The men between the ages of twenty and fifty 
shall have created amounts between these two, pro- 
portionately to the age of each. Thus the young 
man at twenty-one years shall have created five 
hundred dollars. The man at thirty shall have 
created five thousand. And the man at forty shall 
have created ten thousand. 

Now capital, under Marxism, will be productive 
just as today. Let us assume that capital will 
then earn, say, ten per cent of the principal. What 



114 Capital and Profits 

will this mean? It will mean that the capital actu- 
ally created by the man at fifty years will earn an 
income of fifteen hundred dollars a year. The earn- 
ings of the capital of the man at forty will be only 
one thousand dollars a year. The earnings of the 
capital of the man at thirty will be five hundred 
dollars a year. The earnings of the man at twenty- 
one will be fifty dollars a year. The earnings of the 
capital of the young man at twenty will be nothing 
at all, for the young man at twenty shall, ordi- 
narily, have in no capital at all. 

Now if Marxism were just, it would pay to each 
man the full earnings of his capital as well as the 
full earnings of the labor. But will Marxism do 
this? No. On the contrary, this is just what 
Marxism declares it will not do. It will not pay 
any man a cent of dividends on capital. It affirms 
that the only income that it will allow to any man 
is the wages paid to labor. And the whole income 
accruing to each man shall come in the form of 
wages for work and of wages alone. Hence the 
worker at twenty will receive precisely the same 
income as the worker at fifty. But what does this 
mean? It means, as every intelligent man can see, 
that the man at twenty who has no capital in, 
will receive one-half of the earnings of the capital 
of the man at fifty, or seven hundred and fifty 
dollars a year. In other words, Marxism will rob 
the worker at fifty of seven hundred and fifty dol- 
lars of his yearly earnings and pay it to the young 
man at twenty. It will rob the older worker for 
the benefit of the younger. It will make an equal 



Actual Effect of Marxist Economics 115 

division of unequal earnings and it will do this 
because it refuses to distinguish between the earn- 
ings of a man's work and the earnings of his capital. 

2. 

But this is not all. Suppose that under Marxism 
the man at fifty stops work, what about his income 
then? Will Marxism allow our industries to pay 
him the earnings of that capital which his labor has 
created, which will amount, as we have shown, to 
fifteen hundred dollars a year? No. On the con- 
trary, under Marxism, when a man at fifty stops 
work all income to him will cease. For Marxism 
will pay no dividends whatsoever on the earnings 
of capital; and it shall have made no record of the 
capital which the labor of each man has created. 
The result will be that, if Marxism is true to its 
avowed principles, when the worker at fifty stops 
work, though the capital which he has created will 
continue to earn fifteen hundred dollars a year, yet 
the worker shall receive nothing at all. On the 
contrary, Marxism will say to him, — "keep to work 
or starve" Indeed, Marxism makes its boast that 
it will do this. For it proudly affirms that it will 
not permit any man to earn a cent of income as 
a dividend from invested capital. "Work or starve" 
— it affirms shall be its motto. Thus, we perceive 
that so long as the man at fifty keeps to work, Marx- 
ism will rob him of only one-half of the earnings of 
his capital; but when he stops work entirely, when 
he shall need this earning of his capital the most, 
Marxism will rob him of it all. 



116 Capital and Profits 

But even this is not the whole story of the in- 
iquity of the Marxist economics. For Marxism will 
not only rob the worker who stops work of all the 
dividends earned by his capital but it will rob him 
also of that capital which, as I have shown, Marxism 
will compel each worker to invest. For when the 
worker at forty-five or fifty stops work, what will 
become of the fifteen thousand dollars which Marx- 
ism has surreptitiously compelled him to invest? 

Will Marxism allow the worker to draw this out 
for his support? No, for no record of this invest- 
ment shall have been kept. It shall have been 
taken out of the worker, like the tariff today, in- 
directly, surreptitiously. And when the man at 
fifty stops work Marxism will not return to him a 
cent of this fifteen thousand dollars which is truly 
his. Thus Marxism will rob the worker not only 
of his dividends, but also, when he stops work, of his 
whole invested capital besides. Is this just? Will 
the workers stand for it? Not as soon as they get 
their eyes open. Thus Marxism will prove to be 
a terrible system of concealed robbery. 

3. 

But in the next place, by thus robbing the worker 
of his whole invested savings, Marxism will cut off 
all possibilities, on the part of the worker, of making 
any adequate provision for economic leisure or for 
sickness and old age. For, first, every man, it can 
be seen, wi 1 be reduced to the condition of a cap- 
italless workingman. All distinction between the 
wages earned by labor and the dividends earned by 



Actual Effect of Marxist Economics 117 

capital will disappear. The whole income accruing 
to each man will be in the form of wages, and of 
wages alone. It follows that the moment that a 
man shall quit work his whole income will cease. 
And the moment the extra savings which he may 
have laid by in his stocking, if any, are gone, he 
will be destitute. He will be obliged to come upon 
his relatives or the town for support. Marxism 
may make it easy for a man to live during the days 
of youth and vigorous health, but when strength 
begins to decline and when at last the man is able 
to work no more, its effects will be simply disastrous 
unless some artificial device shall be invented to 
rectify its evils. Marxists say that under Marxism 
the worker would be allowed to save his earnings, 
only there will be no dividends from them. But this 
is a most deceptive promise. For, as we have seen, 
Marxism will surreptitiously compel every man to 
pay in his full quota of the required capital (or 
fifteen thousand dollars), and then, as I have shown, 
when the worker stops work, it will withhold from 
him the whole amount which he has then put in. 
How, then, will it be possible for any ordinary 
worker to save, under Marxism, and make any 
adequate provision for economic leisure or sickness 
or old age? For to do this each worker will not 
only be compelled, as has been shown, to pay in 
his full quota of his capital, of which he will be 
robbed — but he will be required to save up enough 
in addition to support himself in old age besides, — 
a thing which would be not only outrageously un- 
just, but, for most men, an impossibility. 



118 Capital and Profits 

4. 

But finally, what will be the psychological effect 
of Marxism? I believe that its effect upon the 
mind will be to convert the larger part of the work- 
ers into spendthrifts and shirks, and the naturally 
prudent into misers. For the greater portion of 
the workers, knowing that their money can earn 
nothing, will be inclined to spend all they shall 
earn as they go along. They will live freely while 
young and strong, but when old age shall come, 
they shall be terribly pinched. The naturally fore- 
sighted, however, will become miserly. For they 
will be ever thinking of the days of old age and 
helplessness, which will surely come; and they will 
strive to save and prepare for them. But since 
their savings will earn no income, they will never 
know when they will have enough saved for the 
purpose. For they will never be able to tell just 
how long the years of old age and helplessness 
shall continue. The result will be that, when a 
man, by hard toil, shall have saved up a few hun- 
dreds or thousands of dollars, he will still be in 
fear that he has not enough to carry him through 
the remaining years of his life. And so he will decide 
to work and save a little more — and still a little more. 
In short, he will never be able to feel quite sure 
that he has sufficient to carry him through. Thus 
there will be a tendency, on the part of the thrifty, to 
hoard and to hoard until they drop into the grave. 

It is plain, therefore, that Marxism is not only 
wrong in principle but its results will be evil. In- 
stead of bringing justice to the worker, as Marxism 



Actual Effect of Marxist Economics 119 

declares its especial purpose to be, it will rob the 
worker, first, of his dividends and then of the whole 
capital (the fifteen thousand dollars) which even 
under socialism, each worker will be necessitated 
to supply. It will deprive the worker of practi- 
cally all hope of preparing for economic leisure, for 
sickness and old age — and it will have a bad effect 
upon the development of individual character. 
Whosoever, therefore, defends the Marxist system 
defends — though unintentionally — the plunder of 
the worker and the destruction of civilization. 

And every other method of industrial reconstruc- 
tion which does not call for the individual subscrip- 
tion of the capital and the payment of dividends, 
will be equally disastrous and equally predaceous. 

Men today will advocate " public ownership," 
or " the turning of our industries over to the gov- 
ernment." And they will get up petitions for the 
" taking over of our railroads." And today many 
of the people of New England are asking — " whether 
it is not time to take over the New Haven system 
and all its branches." But nobody seems to have 
stopped to inquire just what are the different 
factors which enter into our industrial and eco- 
nomic life; nor what the proper taking over of 
our industries by the public should involve. And 
it is a fact that every such proposition involves 
the Marxist error and will result in the elimination 
of an individualized capital and the payment of 
dividends. And yet such a method of taking our 
industries over would be disastrous to our economic 
life, and destroy civilization. 



CHAPTER X 

Are Pensions an Adequate Substitute 
for Dividends? 

MARXISTS have not been entirely blind to 
those evil effects of their economic system 
which I have pointed out in the preceding chapter. 
They have seen that if the resolution to abolish 
every source of income except the wages paid to 
labor, is rigidly carried out, it will leave each man 
and woman helpless during extended sickness and 
make it impossible to provide for the increasing 
expenses of life, economic leisure and old age. But 
instead of this consideration leading them to go 
back and reform their system, they have sought 
by artificial devices to remedy its defects. 

The chief device which they have offered for this 
purpose has been that of pensions. For, under 
Marxism, literally everybody shall be pensioned. 
First, every worker — according to some Marxists 
— is to be pensioned from the very beginning, by 
being given a yearly increase of salary and thereby 
enabled to meet the increasing expenses of life. 
Every man will be pensioned while sick. Every 
mother will be pensioned during the child-bearing 
period and so be paid for the service of bearing 
new citizens for the state. And economic leisure 
and old age will be cared for by paying every man 

120 



Pensions no Substitute for Dividends 121 

a pension sufficient to support him without work 
during the third period of life. 

Thus Marxism, having cut off all dividends and 
thereby deprived the individual of all possibility 
of caring for his own future, will remedy this defect 
by substituting government pensions in their place. 
Everybody will become, in short, a ward of the 
government. " Thus " — declares Marxism, — " we 
shall provide adequately for every person's future 
and for all the material needs of each, and yet 
get rid of all dividends and all income from capital." 

Now the question before us is — Is this claim good? 
And are pensions a good substitute for dividends 
earned on an individually subscribed capital? 

Before answering this question an important 
observation should be made. It is this: Pensions 
are nothing but dividends brought back in disguise. 
The truth of this is seen upon a little considera- 
tion of the subject. For where shall these pensions 
come from? How shall they be produced? 

These pensions which Marxism will pay out so 
liberally will certainly not come out of the air. 
And if Marxism makes good its declaration that 
it will pay to each worker the full product of his 
labor " undiminished by rents, interest or profits," 
these pensions cannot come out of labor. Where 
then, we ask, will they come from? They evidently 
must come, if they come at all, out of the earnings 
of capital. And our industries will have to be cap- 
italized so as to produce them. At any rate, these 
pensions will have to come out of the industries 
of the country. And the industries of the country 



122 Capital and Profits 

will have to be so productive as to yield the required 
amounts to each pensioner. Wherein, then, will 
these pensions, industrially viewed, differ from the 
dividends which Marxists profess so thoroughly to 
abhor? In no respect whatsoever. 

The truth is that Marxism, after condemning 
all profits as of the devil, and with trumpet 
and drum, declaring its stern resolution to abolish 
them forever, is compelled by economic necessity 
to bring them back under a disguised form and a 
new name. 

2. 

But granting that this is so, will not pensions, 
after all, be a good substitute for the dividends of 
the so-called dividend-paying system? 

To this inquiry a little study gives a most de- 
cidedly negative answer. 

The great evil of every pension system that can 
be devised is that it invariably cuts the knot of in- 
dividual responsibility for one's self. It makes the 
recipient the irresponsible ward of the government, 
and thereby destroys individual character and 
opens the way for corruption and graft unspeakable. 

Some socialists say that under the pension sys- 
tem all will not receive the same pension, but that 
the amount to each shall be regulated according to 
merit on the one hand and according to need on 
the other. " It will be according to merit because 
the man who works the hardest and is the most 
skillful will perform the greatest service, and should 
therefore, receive the largest pension. And it will 



Pensions no Substitute for Dividends 123 

be according to need for the man who has the mis- 
fortune to meet with an accident or who, through 
illness, is unable to work, should not be called upon 
to bear the whole misfortune alone. Society should 
share the burden with him." 

Now this pensioning of everybody according to 
merit on the one hand, and according to need on 
the other, may appear, at first, to many as a very 
beautiful thing and a good substitute for an indi- 
vidually earned dividend. But it will not work. 
It will result in unlimited graft and corruption. 

For it will destroy all immediate causal connec- 
tion between the capital which each worker will 
actually invest and the income which he will re- 
ceive. In the dividend-paying system, when justly 
organized, the dividends of each man will rigidly 
correspond to the capital which he has invested. 
His country will demand of him a certain yearly 
investment of capital until the full quota of his 
required subscription is in. And it will permit him 
to invest as great a surplus above the required 
amount as his industry and thrift may create. And 
his country wijl say to him, — " go to work, invest 
your share of the required and the surplus capital 
of the country and you will receive your share of 
the accruing dividends." His dividends, therefore, 
from year to year, and his final yearly income 
during the third period of his life, will depend in 
no respect upon government favor or disfavor, but 
entirely upon his own industry and frugality. He 
must simply go to work, earn his money and sub- 



124 Capital and Profits 

scribe his due share of the capital and his dividends 
will be sure. 

But under the Marxist pension system an en- 
tirely different law will prevail. The pension of 
each man will not depend in the last analysis, upon 
what he does, but wholly upon the judgment which 
the government will form, or can be persuaded to 
form, concerning his merit or need. There will be 
no necessary and inevitable causal connection be- 
tween the capital which his labor has produced, 
saved and invested, on the one hand, and the 
income which he shall receive, on the other. And 
what will be the result? The result will be that 
while there will be a few thoroughly honest men and 
women who will seek to obtain a pension which 
their real merit or real need may demand, yet the 
vast majority of the people will seek to thrust their 
hands into the public treasury and draw out as big 
a pension as possible, regardless of either merit or 
need. For let us suppose that the Marxist pension 
system is once inaugurated and the man who has 
reached the age of forty-five or fifty is to be retired 
from work and placed on a pension. Now what 
will that man do? That man may or may not have 
been a faithful worker during the past twenty-five 
or thirty years of his life, but of this we may be 
sure, that unless he is one of the rare saints that 
exist among ten thousand, he will try to prove his 
merit to be of the first quality and that he should 
be awarded a good, big pension. If any system of 
marking has been kept up during the past years, 
he will declare that he has been underrated and 



Pensions no Substitute for Dividends 125 

discriminated against. Or if his merit is decidedly- 
shady — if he has been an arrant loafer in the past, 
we may be sure that he will then seek to come 
onto the pension roll on the ground of need? He 
will say — " If I have not worked as hard as some 
others in the past it was because I was sick. My 
liver was in a terrible condition, and my kidneys 
were just something awful. Nobody knows how I 
have suffered. And can any man work when sick 
and suffering? " And so, on the ground of need, and 
the Marxist declaration that sickness is a misfor- 
tune which the whole community should bear, the 
man will demand a good, big, yearly pension. 

And associations will be formed and a vast army 
of pension lawyers will spring into existence, having 
this one secret end, to obtain for the members of 
the association big pensions regardless of merit 
or need. And this association will silently mark 
and turn down every official and every man in 
every pursuit who does not favor their boundless 
looting of the public-treasury. 

Socialism is right in its affirmation that human 
nature is essentially good in its tendencies, and 
when given a good environment and a good social 
order, it will choose the good rather than the evil. 
And under a transformed industrial system, human 
nature will doubtlessly be transformed and those 
selfish and greedy elements which now mark human 
nature will, under a better system, be gradually 
eliminated. But is the Marxist pension system a 
better system? Is it fitted to evoke the better rather 
than the worst elements of human nature? To this 



126 Capital and Profits 

inquiry it must be said that the Marxist pension 
system is fitted to evoke all that is worst in human 
nature and it will destroy what is best. Its con- 
stant appeal will be to the sly and the dishonorable 
and the corrupt elements of man. It will fairly 
compel men and women, who would otherwise be 
honest, to be dishonest in order to hold their own 
in the corrupt race for pensions which Marxism will 
inevitably inaugurate. 

3. 

But suppose that in order to escape these in- 
terminable frauds and this terrible corruption, 
Marxism should decide to pay to every person, 
rigidly, the same pension as say fifteen hundred 
dollars a year, at forty-five or fifty years of age, 
regardless of merit or need, would not that be a 
good substitute for the present dividend-paying 
system? 

No. For in the first place it will be fundamentally 
unjust. For to pay everyone — the idle and the para- 
sitic classes, exactly the same income or pension as 
the industrious and thrifty, is most unfair. 

In the second place, such a pension system will 
encourage shirking and parasitism to an unlimited 
degree; and it will enable the idle and shiftless 
classes forcibly to load themselves upon the backs of 
the industrious and paralyze all industry. 

For suppose that the Marxist pension system has 
been adopted and it is decided that every person 
is to receive a good, big pension when a certain 
age is reached, regardless of need or merit, and 



Pensions no Substitute for Dividends 127 

what will be the inevitable result? The inevitable 
result will be that nine-tenths of the population 
will deliberately shirk every burden; they will 
endeavor to perform the least possible work during 
the second period of life, with the expectation that 
they will be placed upon a good, fat pension equally 
with everyone else when the required age is reached. 

But in doing this the idlers will not only shirk 
the great burdens of life, but they will deliberately 
load themselves upon the backs of the industrious 
and thrifty classes. For whence will these good, 
big pensions, which all will alike receive, come 
from? They will come largely from the work of 
the industrious classes. For the idlers having 
shirked every burden shall not have produced them. 
These pensions, therefore, will be the product of 
the work of the industrious classes and the idlers 
will thus be loaded upon the backs of the industrious. 

The discouraging effect of this upon the indus- 
trious can be imagined. For what will the indus- 
trious classes see? They will see all around them 
men and women between the ages of twenty and 
forty-five, giving themselves up to idleness and 
pleasure, — men and women who will shirk all the 
hard tasks of life; and yet the industrious will 
know that when the third period of life is reached, 
these idlers will receive a good big pension from the 
public treasury — a pension as big as shall be paid 
to the most industrious. And this reflection cannot 
fail to have an embittering effect upon the mind. 
It will lead them to shirk also. For they will ask 
the question — " Why should we toil and bear all 



128 Capital and Profits 

the hard burdens of life when these idlers will inherit 
the same income as ourselves. " 

But someone asks, will not the fact that the 
value of future pensions will be vitally affected by 
the quality of labor stimulate the idlers to earnest 
toil? This consideration will no doubt stimulate 
the industrious and the far-sighted. But it will 
stimulate the idlers to still greater idleness. For 
suppose that the industrious and farsighted do work 
hard and seek, by still greater exertions, to increase 
the value of future pensions, who will reap the fruits 
of this increased labor? The indolent and the dis- 
honest classes will benefit by this increased labor as 
greatly as those whose labor has produced the in- 
crease. And the idle and the inefficient will cun- 
ningly continue in idleness assured that the active 
and enterprising will work rather than starve, and 
that they, the indolent and the inefficient, can 
therefore, continue in idleness and live upon the 
toil of the industrious. For when pensions are 
paid, the product of the toil of the few must be 
evenly shared with the idle, the shiftless and the 
dishonest classes. Thus the idle and shiftless 
classes will be able forcibly to load themselves onto 
the backs of the industrious and there will be no 
way of relief. 

4. 

But in the fourth place, the pension system does 
not appeal to the manly and womanly qualities of 
the normally constituted person, and cannot, therefore, 
win the support of the majority of the race. 

All intelligent men and women can see that 



Pensions no Substitute for Dividends 129 

Marxism is capitalistic communism. And commun- 
ism will not work. They can see that while repu- 
diating all dividends or profits, Marxism will bring 
them back in the disguised and corrupting form of 
pensions. But in doing this, it will take the divi- 
dends earned by capital and put them into a com- 
mon pot and divide them equally between the 
indolent and the industrious classes. In doing this 
it can be seen that it will cut the knot of individual 
responsibility for one's self; it will encourage shirk- 
ing to an unlimited degree, and enable the shiftless 
to load themselves forcibly upon the backs of the 
thrifty and industrious. // will result, therefore, in 
a real "equal division of unequal earnings." 

There are, as it has been said, three essential 
factors in our economic life. The first is the right 
to work and earn a just wage or salary; the second 
is the right to buy and pay a fair price, and the 
third is the right to invest one's savings in our 
country's industries and earn a just income from 
them. 

Now what the intelligent worker wants is not 
the abolition of any one of these factors, — least of 
all the third, — but justice in their operation and 
greater efficiency in the production of wealth. And 
what the intelligent worker wants in the matter of 
investing one's savings is not a system that will 
allow nobody to save and invest and then make 
every man the ward of the government, but a 
system that will give equal opportunity to every 
worker and protect each man's right to invest with 
equal safety, profit and permanency with every- 



130 Capital and Profits 

body else, and so enable each man to pension him- 
self, justly, according to his true ability and worth. 
It is only the sick in mind, or the idle and inefficient, 
or those who have lost faith in themselves, or the 
corrupt, that really desire the pension system. 

Until socialism, therefore, can present a definite 
scheme of industrial reconstruction that will pre- 
serve the individual investment of capital for an 
income, socialism cannot prevail. It is a fact that 
a large part of the thoughtful and intelligent work- 
ingmen — farmers, teachers, and others in America 
are carefully studying the Marxist teaching con- 
cerning capital, rents, profits and dividends, and 
are deliberately rejecting it. And already the foes 
of socialism are seeing the weakness in the socialist 
position and are using it to its overthrow. Neither 
the socialist party nor any other party of industrial 
reconstruction can prevail until it is freed from the 
Marxist error concerning capital and dividends and 
gives to both these factors their true place in our 
economic life. 



CHAPTER XI 

Is the Profit System the Cause of 
Present Industrial Wrongs? 

A QUESTION which presses itself upon the 
mind is — Why does the socialist party enter- 
tain such an invincible hatred of profits — a hatred 
which no power of reasoning seems to be able to 
overcome? 

A little study of socialist writings and speeches 
today quickly reveals the cause. All socialists, 
misled by Marx, have come to believe that what- 
ever be the abstract right or wrong of dividends, 
they are the sole cause and source of all the 
evils of our present industrial life. It is, say they, 
the lust for big dividends that is the ultimate 
source of all the greed and strife that marks the 
present system; it is the hunger for profits that 
leads to deliberate mismanagement, to railroad 
wrecks, to mine disasters, and factory fires; it is 
the thirst for profits that causes child labor, the 
liquor traffic, and the robbery of both the worker 
and the consumer, and results in the existence of 
vast, unmerited riches and terrible, unmerited pov- 
erty side by side. All these and other evils, say 
the socialists, come out of the profit-system. And 
these evils can never be banished until the profit- 
system is abolished and abolished forever. 

131 



132 Capital and Profits 

Is this Marxist diagnosis of the cause of present 
industrial wrongs correct? And must all profits 
and dividends, therefore, be abolished? 

In reply to this inquiry it should be said first, 
that there is apparently some truth in the Marxist 
charge against profits and dividends. 

For what are profits and what are dividends. 

All our industries, when rightly organized, are 
designed to be instruments of service. Their pur- 
pose is to provide the race with food, clothing, 
home-comforts, books, travel, pleasure, riches, power 
and honor, — in short, with all material and even 
spiritual good. And dividends are nothing but these 
things divided and distributed, with justice, according 
to the capital which each man has invested, — even as 
wages are these things divided according to the 
labor which each man has performed. 

Now it is a fact which no man can deny, that the 
desire for these things has been and always shall 
be, so long as human nature is morally undeveloped, 
a source of evil, as well as good. It is the desire 
for food and clothing, for riches and power, that 
leads, under certain conditions, to strife and war. 
Desire for these things has caused the powerful 
nations, in the past, to make war upon the weaker. 
It is the lust for these things, especially in a badly 
organized system, that leads to mismanagement, 
to railroad wreckage, to mine disasters, and other 
evils. It is the desire for riches and all the enjoy- 
ment and power that riches bring, that results in 
unjust child-labor, in the liquor traffic and other 
vicious kinds of business. All this must be ad- 



Is Profit System Cause of Wrongs? 133 

mitted. For human nature is still morally weak 
and men, like children, will quarrel and go to war 
about things which in themselves are perfectly right. 

But are these things a necessary source, as all 
Marxists affirm, of injustice and wrong and must 
they, therefore, be abolished? 

In reply to this inquiry, it should be said, first, 
that whether these things are or are not a source 
of evil, they simply cannot be abolished. For food, 
clothing, home-comforts, travel, pleasures, riches 
and power are a necessity of human life. And while 
they can, in some measure, be regulated, they can- 
not be abolished. When Marxists say, therefore, 
that profits are an evil and must be abolished they 
are demanding the impossible. 

Marxists do not seem to have a clear conception 
as to the meaning of economic terms. For example, 
they are forever saying that " our industries should 
exist for service and not for profit.' ' But what is 
the difference between the service which our indus- 
tries should perform and the profits which they are 
expected to yield? There is no difference whatsoever 
between the two, when the two are correctly defined. 
For the service which our industries are expected 
to perform is to provide humanity with food, cloth- 
ing, home-comforts, pleasures, riches and power. 
But what are the profits which our industries are ex- 
pected to yield? Are these profits something dif- 
ferent from the service just named? No, they are, 
on the contrary, exactly identical with it. For the 
profits which our industries are expected to yield 
are food, clothing, home-comforts, books, pleasures, 



134 Capital and Profits 

riches and power. When, therefore, socialists say 
that our industries should exist for service and not 
for profit, they are talking sheer nonsense, or they 
are saying what they do not mean. What our 
socialist friends really mean to say is that — "our 
industries should exist for service and not for plun- 
der" or "for the good of all and not for the benefit 
of a few alone" or "for mutual service and not for 
mere selfish gain" But this is not what they really 
say. What they really say is nonsense, for there 
is no difference between the service which our in- 
dustries are expected to perform and the profits 
which our industries are designed to yield. Both 
are one and the same thing. And whether they be 
good or evil, they simply cannot be abolished. 

But are profits, that is, the food, clothing and the 
wealth and the power that are the fruit of industrial 
activity, a necessary evil, as all Marxists teach? To 
this inquiry a little study will give a most emphat- 
ically negative reply. 

For all history and all human experience show 
that men can seek for food and clothing and even 
for riches and power, and yet be perfectly just, in 
all their relations with each other, both in the 
acquisition and the distribution of these things. 
In other words, a study of human life shows that 
the desire for food and clothing, for home-com- 
forts, and all the other products of labor and cap- 
ital, do not necessarily lead to greed, strife and war, 
nor do they necessarily induce the robbery of the 
weak by the strong. When these evils exist, the 
cause lies not necessarily in the things themselves, 



Is Profit System Cause of Wrongs? 135 

but in the low moral and social evolution of man, 
or in an imperfectly constituted industrial system 
or in the failure of some other system within human 
society. When, therefore, Marxism affirms that these 
things — that is, the products of our industrial activ- 
ities, — are necessarily evil and should, therefore, be 
abolished, (assuming that to be possible) it is affirm- 
ing what is entirely untrue. And when Marxism 
advocates the abolition of these things, it is advo- 
cating what, as just indicated, is simply an im- 
possibility. 

2. 

But are not dividends and wages, that is, the 
dividing up of these products of industry according 
to the capital invested and the work performed by 
each, a source of evil? Would not a communistic 
system — a system which permits every one to take 
out according to his needs or desires be an improve- 
ment upon the dividend-paying and wage-paying 
system? No. On the contrary, all experience 
shows that communism simply will not work. It 
produces discontent, idleness, shirking, injustice and 
war. It is the dividend-paying and the wage- 
paying policy in a rightly constituted system that 
alone lays the foundation of justice and brings 
peace, contentment and good-will between man 
and man. 

Two brothers once went into business together. 
And they said — (( Since we are brothers we will not 
keep a strict account of the amount of capital put in 
by each, nor of the work done by each, neither will we 
keep a rigid account of what we take out. On the 



136 Capital and Profits 

contrary, if one of us wants a little money or our 
wives want some, we will just take out what we want 
and keep no rigid account of it. Why should we, 
being brothers, be exacting in relation to each other. " 

Now such an arrangement looks, on the surface, 
as very generous and very christian. But how did 
it work? In less than three years these two men 
and their wives were in a condition of discontent 
and bad feeling toward each other. Each was sus- 
picious of the other. Each charged the other with 
taking out of the business more than his share, and 
with shirking his share of the work. And they 
finally dissolved partnership and, while outwardly 
reconciled, yet each believed to the end of his days 
that he had been wronged by the other. And such 
will be the inevitable effect of the communistic 
system, if introduced into society at large. It will 
breed unlimited shirking, parasitism, discontent, 
cunning, strife and war. It is the dividend-paying 
and the wage-paying system which, when rigor- 
ously applied, constitutes the very bulwark of jus- 
tice. It develops manliness of character, and lays 
the sure foundations of contentment and peace 
between man and man. 

Two younger brothers, — members of the same 
family as the two referred to before whose partner- 
ship ended so disastrously, — went also into partner- 
ship together. But taking warning from the ex- 
perience of their older brothers, they said, — "We 
will govern our relations as partners in this business 
after strictly business principles. We will keep a 
careful record of the capital put in and the work done 



Is Profit System Cause of Wrongs? 137 

by each. And each shall be paid from the business a 
salary according to the work which he does and a 
dividend according to the capital which he has put 
in. We shall thus pay wages and divide the profits 
of the business according to strict justice. If, after 
that, either one of us desires to be generous to the 
other out of his own funds, he can do so. But the 
business shall be run after strictly business principles." 
Now to unthinking minds such a rigid policy of 
justice may appear cold, and suspicious and un- 
brotherly. But what was the result of this policy 
as compared with the former? The result was just 
the opposite. The younger brothers never had a 
quarrel. Each sought to be perfectly just toward 
the other in every transaction. Each was careful 
to put in his quota of the capital and to do his 
share of the work and to take out of the business 
rigidly only according to the amount of capital 
which he had invested and the work which he had 
performed. The result was that they never became 
discontented or jealous of each other, their business 
was run after strict principles of justice. But after 
they had divided up the profits of the business, 
they did many acts of kindness to each other. 
One of the brothers had a large family and the 
other had none. The brother with no children 
showed constant kindness to his brother's children. 
He helped them through college. But he did all 
this voluntarily with the money that was justly 
his. And so those two brothers lived together in 
peace and contentment, and they did so chiefly 
because they founded their business relations upon 



138 Capital and Profits 

the principle of strict justice and divided up the 
proceeds or profits of the business after strictly 
business principles. 

So also in society as a whole, to pay dividends, 
that is, to divide up the proceeds of our industries 
after strictly business principles, according to the 
amount of capital that each man puts in, and it 
may be added, to pay wages according to the amount 
of work that each man performs, is to establish 
justice, allay the sources of greed and strife, and 
lay the foundation of peace and good-will between 
man and man. Our dividend-paying and wage- 
paying system is today, amidst all the evil of our 
present industrial life, the one great bulwark and 
rallying point of justice and fair play between man 
and man. Abolish these as all socialists are demand- 
ing, and the last refuge of justice will disappear. 
The chief cause of injustice and wrong in the world 
today, and the cause of discontent and ill-feeling 
between man and man is not, as socialists teach, 
the fact that we pay dividends and wages, but that 
we do not pay them out with strict justice. Our in- 
dustrial system today permits one class to take out 
more than its share of the wages and the profits 
of the business. It deliberately opens the way for 
one class, in short, to rob another class and this 
nourishes cunning, greed, discontent and every other 
evil thing. 

Marxism, then, is utterly wrong when it says 
that profits are the cause and the necessary cause of 
present wrongs. The desire for food and clothing, 
riches and power, do not of necessity create greed 



Is Profit System Cause of Wrongs? 139 

and mismanagement, nor do they necessarily lead 
to strife and oppression. Neither would the aboli- 
tion of these things, — if that were possible, — effect 
a cure. Neither are dividends, that is, the dividing 
up and the distribution of the proceeds of our in- 
dustries, justly according to the capital invested 
and the work performed by each, a cause of evil. 
On the contrary, this dividing up after strictly 
business principles, is necessary to, and the only 
foundation of, a just and peaceful administration 
of the business world. 

3. 

But if profit-taking is not the cause of the greed 
and wrong of our present system what is the cause? 

The first fundamental cause of the evils of 
the present industrial system is the present low 
moral and social development of man and the con- 
sequent absence of any sound economic science to 
guide us in the art of making a living and acquiring 
wealth together as rational beings, in peace and good- 
will toward each other, and with justice to all. 

Man is a social being. The creator has consti- 
tuted us to dwell together and to make a living 
together. We are members one of another, inter- 
dependent and parts of one great whole. We con- 
stitute one great co-partnership. We are like a 
company of men, women and children embarked 
together in a boat upon a sometimes stormy sea, 
and we must sink or float together. We cannot get 
asunder, if we would, without getting out of the 
world. And our Maker has evidently constituted 
us to live together as brethren in love and peace. 



140 Capital and Profits 

It is evident, therefore, that the only principle 
that should govern us as rational beings, in such 
a situation and under such vital relationships, is 
that of fraternal and yet organized co-operation, 
directed by the collective will of the whole, so as 
to secure justice and promote the welfare and mutual 
good-will of all. 

But our present imperfect social ideals and our 
crude economic science, instead of teaching this 
rational principle of organized co-operation and 
democracy in the industrial world, teach just the 
opposite principle, namely, that of individualistic 
strife and war. Our present economic science repu- 
diates the principle of organized co-operation di- 
rected by the people's sovereign will. And it de- 
liberately converts the struggle for bread into a 
fierce free-fight-for-all in which the best man is 
expected to come out on top. And it teaches this 
principle as the very gospel of human progress and 
prosperity. For it affirms that by the operation 
of this principle nature eliminates the weak and 
perpetuates the strong. 

But a true economic science condemns this prin- 
ciple not only as utterly false in theory and prac- 
tice, but also as radically inhuman and fit only 
for savages and barbarians. And this principle is 
the great underlying cause of all our present wrongs. 
For this principle justifies greed and cunning and 
the trampling down of the weak by the strong. 
It creates in the young men in our colleges and 
wherever it is taught, an utterly false and barbarian 
ideal of human life. It sends them forth into the 



Is Profit System Cause of Wrongs? 141 

business-world viewing humanity with its innocent 
men, women and children simply as a field to be 
worked, harvested and plundered by them for their 
own selfish aggrandisement. It divides the race 
into two classes, sheep and wolves, and justifies the 
wolves in devouring the sheep. 

Here, then, is the first great cause, indeed, the 
root of present industrial wrongs, namely, the im- 
perfect social ideal and the crude and barbarian 
economic science which now prevails. And the 
remedy for this source of wrong lies in the teaching 
of a larger and more generous social ideal and the 
introduction of a sounder and a more scientific 
economic science which will emphasise and demand 
organized co-operation and democracy in the in- 
dustrial world in the place of individualistic strife 
and war. 

4. 

The second cause. — The second cause of in- 
dustrial wrongs lies in the absence of all economic 
teaching and vocational training in our public 
schools such as even our present system should require. 

It is a fact that down to the present time the 
boys and girls in our public schools have been 
taught practically nothing of the most necessary 
art of making a living, when adult life is reached, 
and, especially, of making a living together in peace 
and good-will, with justice toward all. They have 
been taught practically nothing of the great prin- 
ciples of the efficient production and just distribu- 
tion of wealth. Their minds have not been directed 
to the true economic foundation of life in the acqui- 



142 Capital and Profits 

sition of capital and the earning of a dividend from 
it. They have not been carefully instructed regard- 
ing the causes of injustice and wrong in the industrial 
world. They have not been trained even in the in- 
dividual virtues of thrift, industry and economy. 
They have not been taught habits of temperance 
and self-control. And they have not been trained 
in any useful vocation so as to fit them for success 
in the struggle for bread. And if such is the con- 
dition of the great mass of the common people in 
America, how much worse is their condition in parts 
of southern Europe and other countries where they 
have practically no schools at all. 

The result is that even in the United States the 
mass of the people come to mature years utterly 
ignorant and helpless economically and vocation- 
ally, and they easily become the victims, not only 
of their own incompetence, but also the victims and 
the tools of the astute and the sagacious classes. 
Furthermore, by their very helplessness they invite 
injustice and wrong; for there is nothing that so 
tempts the cupidity of the astute and the sagacious 
as the existence of a vast, ignorant and easily ex- 
ploited class at the bottom of society. 

Here, then, lies the second great source of indus- 
trial wrong. And to remedy this wrong, it is evi- 
dent that we must plant the public school every- 
where and we must introduce into our schools a 
sound economic science. We must teach everywhere 
the principle of organized co-operation and democ- 
racy in the industrial world, in the place of indi- 
vidualistic strife and war. And we must introduce 



Is Profit System Cause of Wrongs? 143 

a most careful industrial, economic and vocational 
training. We must thus raise up a just, enlightened 
and a competent people, who shall not only be able 
vocationally to fill their place in the industrial 
world, but shall know the foundations of economic 
justice and shall be able so to reconstruct our in- 
dustrial activities as to bring justice and fair-play 
to all in the struggle for bread. 

5. 

The third cause of wrong in our present indus- 
trial system lies in the wrong policy or principle 
which exists at the very foundation of our industrial 
and economic life. 

It is commonly said that American institut'ons 
are democratic and that, therefore, the evils from 
which we suffer in the industrial world are the 
price which we pay for democracy. No greater 
misstatement was ever made. For our government 
is, indeed, in its foundation democratic and our 
school system is also democratic; but our industrial 
system is not democratic at all. It is based upon the 
principle of pure individualism and anarchism. 
There is nothing democratic about it. For indus- 
trial democracy implies the ownership and control of 
the whole industrial world by the whole people, col- 
lectively, organized by law into a single business cor- 
poration to that end. But the industrial world has 
never been owned and administered by the whole 
people collectively, nor have the people ever been 
constituted into a single business corporation for that 
purpose. Indeed, when our government was formed, 



144 Capital and Profits 

our fathers had no desire for such industrial democ- 
racy, and we have always repudiated it. What our 
fathers desired was simply the abolition of all 
special privilege. They desired to make, and did 
make, the struggle for wealth to be a fierce free-fight- 
for-all in which each man was to be given, theoret- 
ically, equal fighting chance with his neighbor with 
the expectation that the best man would come out on 
top. In other words, the man who could produce 
and especially grab the most was to have the most. 
This policy all deliberately adopted. 

Furthermore, under the fallacious plea that under 
a free-fight-for-all policy, justice would be self- 
acting, conscience itself was deliberately repudiated 
as an unnecessary factor in the industrial world. 
Each person was told to plunge into the struggle 
for bread undeterred by any principle of justice 
or fair-play. "These," it was said, "would take care 
of themselves" And the motto adopted by all 
was — Let him take who hath the power and let him 
keep who can. Now if that is not a policy of pure 
industrial individualism and anarchism of the 
worst kind, it is hard to say what industrial indi- 
vidualism and anarchism are. 

Furthermore, this policy was declared by even 
the ministers of the gospel to be the divinely or- 
dained method of eliminating the weak and per- 
petuating the strong. For they said — "if we make 
the struggle for bread to be a free-fight-for-all, it will 
inevitably result that the weak shall be crowded down 
and out by the strong, while the strong will rise to 
the top and live to perpetuate the race. And so progress 



Is Profit System Cause of Wrongs? 145 

shall be inevitable." The Christian scriptures say — 
"// ye bite and devour one another take heed lest 
ye be consumed one of another." But these wise 
philosophers and religious teachers said that this 
law does not apply to the industrial world. On the 
contrary, the very marrow of the gospel of industrial 
progress and human salvation, they affirmed, con- 
sisted in biting and devouring one another, for how 
else could nature eliminate the weak and perpetuate 
the strong? 

But what has been the actual effect of this brutal 
and, as it is now shown, utterly false philosophy? 
Its first effect has been to throw the whole indus- 
trial world into a condition of brutal strife and 
war in which all justice is forgotten. It has of 
necessity arrayed every man against his neighbor 
and every corporation against every other corpora- 
tion. It is this individualistic and selfish policy — a 
policy that is fit only for savages and barbarians, — 
that is the chief cause of that greed and cupidity 
that marks the present system. It is this policy that 
has created the terrible warfare between capital 
and labor, with all its attendant evils. It is this 
policy which calls into being bands of financial 
buccaneers, of fake or semi-fake corporations whose 
only object is to prey upon the people. It is this 
policy that is the primary source of that mismanage- 
ment and selfish economy that results in terrible 
railroad wrecks, appalling mine disasters and fatal 
factory fires. For when a railroad or factory or 
mine is owned by a few men, distinct from the 
workers and the consumers, and when these few 



146 Capital and Profits 

are governed by the law, which forms the basis of 
our present system — of "every man for himself, 1 ' 
and when the few in control know that their time 
may be short and that they must " make hay while 
the sun shines " and grasp all they can before any 
other group ousts them or conditions change, the 
inevitable result is that the few in control will run 
the railroad or the factory or the mine, with the 
one object in view of making and grasping as much 
plunder as they can in the quickest time possible. 
And this means to neglect all proper precautions 
of safety. It means to run great risks and to de- 
press wages and raise prices. In short, it means 
robbery and oppression. Finally, it is this indi- 
vidualistic policy which has called into being that 
financial oligarchy of which I shall speak in the 
next section and which has seized control of the 
whole industrial world. 

Here, then, is the third cause of present indus- 
trial wrongs, namely, the false individualistic and 
anarchistic policy on which our present system has 
been deliberately founded. And until we repudiate 
this policy and adopt instead, full collective owner- 
ship and collective control of our industries, these 
evils shall inevitably continue. 

6. 
The fourth and most terrible cause of present 
industrial wrongs is the seizure and control of the 
whole industrial world by a few irresponsible men 
who are thereby enabled to oppress and plunder the 
people without mercy. 



Is Profit System Cause of Wrongs? 147 

No people can repudiate sovereign collective con- 
trol over any part of their own affairs nor engage 
in perpetual strife and war of any kind with each 
other, without one of two things taking place. 
Either they will, sooner or later, be subjugated by 
some strong, despotic power from without, or by 
some strong, despotic power from within. There 
is no escape from this law. 

Now, in America, the people, misled by a false 
philosophy, have repudiated all collective control 
over their industrial affairs. We have deliberately 
adopted the policy of individualistic strife and war 
in the place of united action. We have adopted a 
policy which is, indeed, fit only for savages and 
barbarians. And what has been the fatal result? 
The fatal result has been that we have not, indeed, 
been subjugated by any foreign power. We have 
been on the alert against that. But we have be- 
come subjugated by an arrogant industrial olig- 
archy from within, an oligarchy as relentless as 
ever placed its iron heel on any people. 

For the astute and the sagacious have not been 
blind like the people. They have seen the need 
of united action on the part of those who would 
rule in the industrial world. They have taken ad- 
vantage of the division of the people and the false 
philosophy by which the people are blinded and 
kept divided. And they have quietly combined 
and acquired sovereign irresponsible control of the 
whole industrial world and loaded themselves upon 
the people's backs to unending generations. 



148 Capital and Profits 

7. 

The chief agent through which the astute and the 
sagacious have acquired this sovereign, irresponsible 
power is the modern consolidated business corpora- 
tion. And this is a truth which it is most import- 
ant to take into consideration, if we would rightly 
understand the source of present wrongs and re- 
construct our industrial system. For few persons 
realize today the significance and the function of 
the consolidated business corporation. Most peo- 
ple regard this institution as a piratical thing, a 
wicked outsider, that has thrust itself into our 
industrial life. But such a view is entirely wrong. 
For the business corporation — the consolidated 
business corporation — is one of our necessary and 
divinely ordained social institutions. It is a just 
and a necessary part of the social order. It is as 
just and necessary as civil government or the 
public school. And it has come to stay. 

A few words will justify this statement. In order 
to effective production and the just distribution of 
our material necessities, three things are impera- 
tively needed. The first is capital, that is, the agents 
of nature harnessed for human service; the second 
is labor, that is, human effort applied to the crea- 
tion and utilization of capital, and the third is some 
institution that will secure consolidated and demo- 
cratic administration and control. For all our in- 
dustrial activities are social, co-operative, and form 
one whole. They must be wrought by the combi- 
nation of all the capital and all the labor of the 
country organized into one great whole. And this 



Is Profit System Cause of Wrongs? 149 

combination of all our industries into one whole of 
which each man is a single organic factor, has 
already taken place, whether we have the intelli- 
gence to recognize it or not. Not a single man in 
the country today makes a living by himself alone. 
We are all interdependent. We are all co-partners 
within a single, vast organized system. And each 
man is dependent upon that system and the method 
of its administration for justice and fair play. In 
order, therefore, to achieve justice and efficiency, 
the industrial system demands a consolidated ad- 
ministration, and an administration directed by the 
sovereign will of the whole people. But in order to 
secure such an administration, we simply must have 
some agent or organization adapted to secure it. 

Now the agent or institution which our indus- 
trial necessities and social evolution are creating 
and have created for this very end, is the consoli- 
dated business corporation. Indeed, it can be 
shown that this institution is designed and des- 
tined to sustain the same relation to the people 
collectively in the industrial world as government 
in the political. For it is evidently designed to be 
the agent through which the whole people collectively 
shall assume sovereign ownership and control over 
the whole business world, and not only secure effi- 
ciency, but justice to every soul. And just as govern- 
ment has come up from small beginnings, in re- 
sponse to our political necessities, and has come 
up to serve as the agent of political democracy, so 
the consolidated business corporation has come up 
from equally small beginnings in response to our 



150 Capital and Profits 

industrial necessities, and it has come in order to 
serve as the agent of industrial democracy. Ex- 
tended proof of this can be given, though we can- 
not give it here. And as in the political world, the 
several colonial governments have been consolidated 
and brought under one all-powerful consolidated 
government, so in the industrial world, the several 
distinct and separated business corporations have 
practically become consolidated and brought under 
the control of one central, all-powerful business 
corporation. 

8. 

Now here is a fact of tremendous significance. 
For every part of the social order has not only its 
peculiar function, but also its peculiar elements of 
power to control which may be used either for good 
or bad ends. For example, the function of the 
church is to teach the people righteousness and 
truth both in the realm of morality and religion. 
Hence, the church has tremendous power to invade 
the mind and either enlighten and emancipate 
it, or darken and enslave it. Hence, we find 
that in all ages, the astute and the sagacious have 
sought to acquire control of the church and use it 
to bend the people to their sway. Again, the func- 
tion of the government is to make law. Hence, the 
government has also tremendous power either to 
oppress or to protect and emancipate the people. 
And, hence, the astute and the sagacious have al- 
ways sought to secure, direct or indirect, control 
of all the departments of government so that the 



Is Profit System Cause of Wrongs? 151 

laws, the judiciary and the police and military 
power shall, in every case of difference between 
them and the people, be on their side. 

Now, the modern consolidated business corpo- 
ration has also its peculiar functions and, there- 
fore, its peculiar sources of power to control. In- 
deed, it has a power within its own proper realm 
equal to that of government itself. And whosoever 
controls the consolidated business corporation, con- 
trols the very sources of the life of the people. 

For, in the first place, it is the function of the 
consolidated business corporation to own the plant 
and to control, as it actually does, all the capital 
and all the labor of the country. It determines of 
necessity who shall work and who not. It is a 
fact that probably three-fourths of all the men who 
work today must apply for work at the door of 
the corporation and take such jobs as it chooses 
to give. It is the corporation that fixes all wages 
with sovereign sway. The corporation determines 
all prices both in buying and selling, and all com- 
modities pass of necessity through its hands. And 
the corporation is coming to be the agent that 
fixes all dividends, and it gives its directors supreme 
control over all the capital of the country. 

Now, let any intelligent person reflect for a mo- 
ment upon this power which is held by the corpora- 
tion, and he will perceive that it is simply tremen- 
dous. In a way, it is more direct and far greater 
than that of government itself. For it holds in 
its hands, we may say, the power of life or death 



152 Capital and Profits 

over every soul, for it controls the very sources of 
life. It can tax the people every time they buy 
or sell. It can protect the worker or rob him of 
his just pay and give to its own servants an income 
greater than that of ancient kings. Such power 
should never be entrusted to irresponsible hands. It 
should be held only by the whole people collectively. 
And here lies the proof of the affirmation made a 
few paragraphs before, concerning the validity and 
the necessity of industrial democracy. For it is 
evident that in view of such tremendous power, the 
consolidated business corporation, like the government, 
should be owned and controlled only by the people's 
sovereign will. 

But what do we actually see today in this so- 
called free America? Is this consolidated business 
corporation owned and controlled by the people 
in favor of justice and efficiency? No. On the 
contrary, we see that this power of industrial con- 
trol is actually held within, and directed by the 
hands of a few men who are responsible to no one 
for the exercise of that power nor for the time that 
they shall hold it. And this irresponsible group of 
men say who shall be their successors. Indeed, 
they often hand their power down to their descend- 
ants like the Czar 'of Russia, and they are able to 
load their children upon the people's backs to live 
in idleness and luxury to unending generations. 
They view all humanity, — men, women and help- 
less children, — as a field to be worked and har- 
vested for their own benefit alone. 



Is Profit System Cause of Wrongs? 153 

9. 

How a small group of men could acquire irre- 
sponsible control of the vast consolidated business 
corporation and come to wield such terrible power 
is easily explained. 

In the first place, the people have been, and are 
still, utterly blind as to the real function and power 
of the business corporation. But the astute and 
the sagacious have not been blind to its function 
and tremendous power. They have been wide- 
awake. And while the people have been asleep or 
insanely warring with each other, thinking that in- 
dustrial strife and war was the very gospel of in- 
dustrial salvation, the astute and the sagacious have 
quietly combined and seized entire control of the 
consolidated business corporation and thereby ac- 
quired a power to oppress and plunder greater than 
that of the ancient Caesars. 

Thus the policy of industrial individualism and 
anarchism, introduced, aided and sustained by the 
ignorance and slumber of the people, has given 
birth to industrial despotism. And the so-called 
class-struggle is no longer a struggle between the 
mere wage-earner on the one hand, and the cap- 
italist-class on the other, but between this merciless 
oligarchy which has grasped all power, on the one 
hand, and the whole people of he United States, 
on the other. For the whole people have come to 
be the helpless victims of this all-powerful oli- 
garchy at the top. Even bankers and other men 
high in the business world, stand in awe of this 
new despotic power. 



154 Capital and Profits 

Now here is the fourth fundamental cause of 
that injustice and wrong that marks the present 
industrial world. For what are the elements of 
power which this irresponsible industrial oligarchy 
holds? It holds all the elements of power that 
reside within the consolidated corporation, as just 
enumerated. 

In the first place, these irresponsible men own 
the plant, although it may have been built wholly 
by the people's money, taken from savings banks, 
or from government appropriations and other 
sources. 

Second, they have the power to say who shall 
work and who not, and who shall go into business 
and who not. 

Third, they are able to fix all wages and salaries 
with despotic sway, and pay very low wages to the 
workers and award enormous salaries to themselves 
and their friends. 

Fourth, they are able to fix all prices and pay 
low prices to the farmer and others who have any- 
thing to sell, but charge very high prices when the 
people come to buy. Thus they are able to push 
the cost of living away up into the air. 

Fifth, by this power to control all wages and 
prices and dividends, this financial oligarchy is 
able to force from the people all the capital which 
the people create, and then appropriate all the 
dividends which of right the people should receive. 

Sixth, but this is not all. When the worker or 
anyone not within the oligarchy in power, succeeds 
by extraordinary efforts, in spite of past robberies, 



Is Profit System Cause of Wrongs? 155 

in saving a little money and investing it, the oli- 
garchy in power will pay him only a very small 
dividend as, four or five per cent, but on its own 
capital — the capital which it has largely appropriated 
from the people, — the oligarchy succeeds, by water- 
ing stocks, by high prices and other methods, in 
earning enormous dividends which sometimes rise 
as high as one hundred and even two hundred 
per cent and more. 

And the oligarchy in power is able by graft, by 
reorganizations and other methods to rob the 
people of the last remnants of capital which they 
succeed in acquiring. 

10. 

The fourth and chief source of present wrongs 
lies, therefore, not in profit-taking, as Marxists 
teach, but in the seizure and control of the consol- 
idated business corporation by the astute and the 
sagacious who are, thereby, enabled to rule the 
whole industrial world with despotic sway and ap- 
propriate the whole product of both labor and cap- 
ital whether in the form of wages and salaries or 
prices and dividends or graft unspeakable. 

And the cause of the class-struggle does not lie, 
as John Spargo says,* in the fact that we permit 
profit-taking, but in the fact that a small group 
of men hold unlimited power over the whole indus- 
trial life of the people, and the people, deprived of 
all power of control, have become the helpless vic- 
tims of those in power. And the struggle between 

* Spargo's Socialism, page 160. 



156 Capital and Profits 

worker and capitalist today is not a struggle on the 
part of one class to preserve, and on the part of the 
other to abolish profit-taking, but a struggle on the 
part of one class to keep, and on the part of the 
other to break this despotic power of control which 
an industrial ol garchy holds within its hands. It 
is, in short, a struggle on the part of both classes 
for power to control, — for power to exact, or to 
refuse to pay tribute, whether in the form of profits 
or wages and salaries or graft. Why does the cap- 
italist class so hate the labor union and especially 
the industrial workers of the world? Why is it 
that all capitalists so persistently refuse to do all 
collective bargaining with the worker? Is it solely 
a question of a little higher or lower wages or of 
efficiency or non-efficiency? No. The fundamental 
question at issue is that of power to control. And 
this the capitalist class clearly perceives. And while 
all that the members of this class ostensibly demands, 
is power to control the business which is rightfully 
theirs, yet in realty they know that they have a 
grip upon the very life of this whole nation and 
it is this power to exact tribute which they do not 
mean to surrender until forced to do so by law. 

And the great question at issue in the United 
States today is not the question whether we shall 
or shall not abolish profit-taking, — for that has 
nothing to do with the matter, — but whether the 
power to control the whole industrial world with 
sovereign sway — the power to fix wages and salaries 
and prices and dividends, and the power to govern 
all industrial opportunities, shall be held within the 



Is Profit System Cause of Wrongs? 157 

grasp of a few irresponsible men or within the 
hands of the whole people collectively, that justice 
may be done. 

It can, therefore, be seen that the cause of present 
industrial wrongs does not lie as Marxists teach and 
the socialist party proclaims, in profit-taking. For 
that has nothing more to do with present wrongs 
than the fact that we eat food and wear clothes. 

The cause of present industrial wrongs lies, 
first of all, in the present low moral development 
of the race and its crude economic science. Second, 
in the absence of all economic and vocational train- 
ing from our schools and the consequent existence 
of an ignorant, slumbering people who easily become 
the victims and tools of the astute and the sagacious, 
and who, by their very ignorance, tempt the greed 
and the cupidity of the astute and sagacious. Third, 
in the false individualistic and anarchistic policy 
which lies at the very basis of our present sys'em. 
And fourth, in the industrial despotism to which 
that individualistic policy has of necessity given 
birth. 

The cause of present wrongs, therefore, is partly 
intellectual and moral and partly sociological and 
organic. 

And to remedy these sources of wrong, we must 
not attack profit-taking or the investment of one's 
savings for an income, but we must enlighten the 
people and give them a larger moral and social 
ideal. We must arouse the workers, the farmers, 
the small business man, the teacher and the preacher, 
to a sense of collective responsibility for the defense 



158 Capital and Profits 

of their own and the people's rights. And, repu- 
diating that industrial individualism and anarchism 
on which the present system is based, we must 
resolutely overthrow forever that industrial oli- 
garchy which now rules the industrial world and 
establish a real industrial democracy in its place. 
We must, in short, make the people collectively to 
be the business corporation, by law, and then turn 
the whole industrial world over to their sovereign 
administration and control. For, then, the people, 
collectively, and not an irresponsible oligarchy, shall 
have control of both capital and labor. And they 
shall have the power to fix wages and salaries, and 
prices and dividends, with justice toward all. And 
all spoliation shall of necessity cease. 

When, therefore, Marxism attributes the cause 
of present wrongs and the class-struggle to profit- 
taking, it gives an entirely wrong diagnosis of the 
case. It fails to hit the bull's eye of the evil. It 
fails to direct the energies of the people against 
the right point of attack. And in creating a hatred 
of dividends, it is causing the people to seek to 
destroy that which it is of the greatest importance 
to preserve, and which is the very bulwark of 
justice and fair play between man and man. 

In the following chapters it shall be shown how 
we can reconstruct our industrial system and yet 
give to capital and profits their true place and 
function. 



PART V 

The Right Concrete Plan or The 

Next Step in Our Industrial 

Evolution 



CHAPTER XII 

The Right Concrete Plan— Fundamental 
Principles 

THE time has come when we must work out a 
definite concrete plan for the reconstruction 
of our industrial system and the remedy of present 
industrial wrongs. The need of such a plan is 
imperative. The proclamation of a mere abstract 
principle will not do. The socialist party, handi- 
capped by the Marxist errors, is forever saying — 
" We do not need any concrete plan to remedy 
present wrongs. Just put the working class into 
power and it shall be given them what to do." 
Such talk appears to many to be the sheerest non- 
sense and it will surely end in failure. 

All human progress is the product of two factors. 
First, there is always the pressure of some great 
wrong, or the desire for some great good. And 
second, there is the agency of the inventive mind 
in working out the right concrete plan by which 
to remedy the wrong or bring in the desired good. 
There never has been a single step of human pro- 
gress at any time in human history without the 
presence and operation of both of these two factors. 

And it is exceedingly dangerous to go forward in 
any great reconstructive movement without a clear 
conception of the concrete remedy to be applied. 

161 



162 Capital and Profits 

For, for any people to revolt against some great 
wrong with no clear conception as to how that 
wrong shall be righted, is to invite failure and 
throw away human life and effort to no purpose. 
Certain doggerel lines run — 

"A mule can kick and still be a mule 
A man can kick and still be a fool, 
Unless he kicks to a purpose." 

And this is what every people or class does when 
it revolts against some great wrong but has no con- 
crete plan by which to remedy that wrong. Vene- 
zuela is said to have had thirty-two revolutions in 
thirty years, a little prior to the year nineteen 
hundred. And yet at the end of that time, the con- 
dition of the people was no better than when they 
began. And this was because they did not possess 
sufficient intelligence to work out that concrete plan 
or measure, which was necessary to remedy the 
wrongs against which they revolted. And the pres- 
ent revolution in America against the present in- 
dustrial system, will end in failure unless we have 
sufficient intelligence to work out the true concrete 
plan or measure by which to remedy those wrongs 
to which we are opposed. 

In this chapter it is our purpose to inquire 
— what are those fundamental principles which 
must lie at the basis of all successful and effective 
industrial reconstruction? 

First. — In order effectively to remedy present 
wrongs we must, first of all, secure for the people, 
collectively, by means of government enactment, 



Right Plan— Fundamental Principles 163 

the direct sovereign ownership and control of the 
whole industrial system and every element of 
sovereign industrial power must be placed, finally 
and forever, within their hands. The people, in 
short, must be the sovereign masters of the whole 
industrial world. 

At present the whole industrial system is owned 
and directed by a few irresponsible men; and a 
feudalistic oligarchy is rapidly obtaining sovereign 
control of the whole industrial system and making 
it the agent of unlimited oppression and plunder. 

In order to remedy present wrongs, therefore, 
the first thing to do is not to go back to that law- 
less individualism which our fathers adopted. For, 
even if that were possible, it would only reproduce 
the very conditions from which our present evils 
have sprung. Neither can we continue under the 
present despotic organization. In order to remedy 
present wrongs, the thing which we must do, there- 
fore, is to go resolutely forward to a real and effec- 
tive industrial democracy. In other words, looking 
that irresponsible oligarchy which now oppresses 
us in the face, we must say, cost what it will — 
" You must go," — and by the sovereign power of 
the ballot, by act of law, we must compel it to go. 
And the people must, for the first time in human 
history, assume resolute, collective ownership and 
sovereign control of their whole industrial system 
and so bring justice to all. 

And the people collectively must assume every 
industrial responsibility and every element of sov- 
ereign industrial power. They must ultimately own 



164 Capital and Profits 

every plant — the railroads, the factories, the tele- 
graphs and telephones, the lands and the real 
estate. They must be responsible for the subscrip- 
tion and control all the invested capital; they must 
elect and call to account, by some right method, the 
directors of each plant; they must, by some right 
method, fix all wages and salaries and direct all 
labor of the country according to justice; they 
must fix all prices and determine all dividends; 
and in every other way assume the direct sovereign 
management and control of all our industrial activ- 
ities. Thus we must make the people to be, indeed, 
collectively responsible and collectively supreme. Such 
is the first principle which we must resolutely adopt, 
if we would properly reconstruct our industrial 
system. 

It is important to emphasize this truth at this 
time, for there are those who hate the present 
despotic control which has seized upon the indus- 
trial world, and yet they fear industrial democracy. 
They seek, therefore, a middle ground between the 
two. This seems to be the idea of the so-called 
progressives in both the old political parties. They 
advocate the creation of industrial commissions to 
watch and control the trusts. They thus hope, 
through the industrial commission, to restrain the 
corporation within legitimate bounds and yet con- 
tinue to preserve the old individualistic principle 
which makes the struggle for bread and for wealth 
to be a free-fight-for-all in which the best man is 
to come out on top. 

But these progressives shall utterly fail in their 



Right Plan— Fundamental Principles 165 

expectations. There is no middle ground whatso- 
ever between an absolute industrial autocracy on 
the one hand and a sovereign industrial democracy 
on the other. Our experience with the Sherman 
anti-trust law and the numerous industrial commis- 
sions which have been created within the past few 
years, all verify this affirmation.- The only wise, 
enlightened and surely successful course to pursue 
today is to put our trust in the people, and go fear- 
lessly forward to a full, unhampered industrial 
democracy. This alone will bring us sure relief, 
and make justice universal and permanent. 

Second. — In order to remedy present wrongs, 
the people must acquire and exercise this sovereign 
ownership and control through the modern consoli- 
dated business corporation which is the specific agent 
of industrial consolidation and control. In other 
words, the people must themselves be the corpora- 
tion. 

The social organization of man, like the organiza- 
tion of the human body, is a very complex affair. 
It has a distinct organization for each function. The 
moral and religious instruction and training of the 
people — that is, their training in righteousness, 
happiness and life, — belongs to the church. The 
function of law and order belongs to the government. 
The function of education belongs to the public 
school. The care of the criminal classes and the 
bodily and mentally defective belongs to our cor- 
rections and charities. And every other social 
function belongs to some special organization 
adapted to that special end. 



166 Capital and Profits 

If, therefore, the people collectively desire to 
obtain sovereign control over any public function 
they must acquire and exercise such sovereign owner- 
ship and control through that particular part of the 
social order to which that particular function specifi- 
cally belongs. 

Now, what is that particular part of the social 
order to which our industrial activities specifically 
belong? It is evidently not the church, as all will 
see at once. Neither is it the public school, and 
neither is it the government. That particular part 
of the social order to which our industrial activities 
specifically belong is the consolidated business 
corporation. 

The truth of this affirmation is seen upon a 
little study. For, as it has already been shown, the 
modern consolidated business corporation was spe- 
cifically created by our economic necessities for 
this very end. This consolidated business corpora- 
tion is no piratical organization that has fastened 
itself upon the social order from without. It is 
the product of our necessary social evolution. It 
is an institution of vast proportions and tremendous 
power. Furthermore, it is specifically adapted to 
become, and indeed is designed to be, the agent of 
industrial democracy. For the business corpora- 
tion embraces two great factors. First, there are 
the voting members, who own the plant, supply the 
capital, and exercise sovereign authority and power 
over the organization; and second, there is the 
directorate which is chosen by the voting members 



Right Plan— Fundamental Principles 167 

and serves as their agent, acting under their au- 
thority, in the management of the business. 

Now here, it can be seen, is the most perfect 
basis for the establishment of a real industrial 
democracy. For, to achieve this end, all that we 
need to do is to make the whole people collectively 
to be, by law, the sovereign voting members of the 
corporation and throw every industrial responsibil- 
ity upon their shoulders and all power into their 
hands. And at once we shall have a real industrial 
democracy. 

And this is what we must do if we would effect 
a true industrial reconstruction and give to capital 
and dividends their true place. We must make the 
whole people collectively to be the consolidated 
business corporation and then place all industrial 
responsibility and power within their hands. We 
must give to them the ownership of each plant; 
make them rigidly responsible for the supply of 
the needed capital; enable them to elect all direc- 
tors; control all labor, fix all wages and salaries, 
and prices and dividends; and so control the whole 
corporation with sovereign sway. Such is the 
second principle which we must adopt if we would 
achieve effective industrial reconstruction and rem- 
edy present wrongs. How this measure shall be 
introduced shall be shown later. 

Third. — In the reconstruction of our industrial 
system we must continue to call for, and even require, 
the individual subscription of the capital and pay div- 
idends, just as in the private corporation today. 

For, as we have already shown, no plant can be 



168 Capital and Profits 

created and maintained without capital. Hence, 
every man should be called upon and even required 
to supply his due quota of the needed capital. And 
this will, indeed, be no new requirement. For today 
every man is, as a matter of fact, made to put in 
his quota of the needed capital of the country, — 
only today it is taken out of him largely by stealth 
and no record of it is kept and no dividend is given. 
And no man will escape the same process under 
Marxist socialism, notwithstanding the fact that 
many seem to think to the contrary. For under 
Marxist socialism, as it has been shown, the capital 
shall have to be raised just as truly as today and 
every man will be obliged to pay in his due quota 
just as today. The only difference will be that 
under Marxism, just as today, it will be taken from 
each man by stealth. No record shall be kept of 
it and no dividends shall be paid. And when a man 
stops work, as we have shown, Marxism will rob 
him also of all his capital. Since, therefore, we all 
must pay in our quota anyway, and since we do 
not desire to be robbed either of our dividends or 
capital, a true economic science demands that each 
man shall be called upon to subscribe and pay in, 
individually, his due quota and that each shall also 
receive, as we have said, the due earnings of his 
invested capital. 

And we have seen the imperative need of the 
payment of dividends on the capital invested. For 
capital is productive and it is a necessary source of 
income in every man's life. The payment of divi- 
dends is necessary to secure justice. Not to pay 



Right Plan— Fundamental Principles 169 

dividends is robbery. Furthermore, we cannot get 
rid of the payment of dividends as it has been 
shown in the preceding chapters. They are an 
economic necessity; and if we try to abolish them 
in one form, they will inevitably come back in an- 
other. For if we refuse to provide for life's neces- 
sities by the payment of dividends on the earning 
of each man's capital, then, like Marxists, we shall 
be compelled to resort to the vitiating and pauper- 
izing method of pensions. True economic science, 
therefore, demands that we shall frankly recognize the 
utility of dividends, that we shall preserve them and 
perfect their operation, and make them to be the 
crowning feature in our new industrial system. It 
follows, therefore, that we must not only refuse to 
omit the individual investment of capital and the 
payment of dividends, but we must positively de- 
mand, in the acquisition of every old plant and the 
creation of every new, that, in each case, the cap- 
ital shall be individually subscribed and that divi- 
dends shall be paid and even guaranteed. 

Fourth. — In order to achieve the effective re- 
construction of our industrial system, we must 
keep the administration of our industrial activi- 
ties organically distinct from every other function; 
we must conduct these activities after strictly busi- 
ness principles, and we must bring them under such 
regulations as are necessary to prevent abuses, 
bring justice to every man and bring efficiency 
into every function. 

In the course of our social evolution, it is a simple 
fact that a distinct institution has been created for 



170 Capital and Profits 

each special function. And all history shows that 
in order to secure efficiency in any function and 
escape corruption, it is important to keep each 
function entirely distinct, administratively, from 
every other. Thus all history shows that church 
and state should be kept distinct. We cannot mix 
the two functions without corruption and oppres- 
sion. We are learning, too, the need of keeping 
distinct the political and the educational functions. 
Just so sure as we allow these two functions to 
merge in any way, education suffers and govern- 
ment is corrupted. So also it is true that just so 
sure as we mix our industrial and political func- 
tions, our industrial functions will suffer and the 
government itself will be corrupted. 

When, therefore, we reconstruct our present 
system and the people become the business cor- 
poration, we must not turn the business manage- 
ment over to the government, nor must we permit 
our business directors in the public corporation 
which we shall create, to be appointed by the 
mayor of the city, or the governor of the state, or 
the president of the United States. No private 
corporation today would think of choosing its 
directors in that way and neither must the public 
corporation do so. When the people collectively 
shall have the management of their own industries 
within their own hands, they must choose their 
own industrial officials and make them directly 
responsible to the people. 

And we must conduct our industrial activities 
after strictly business principles. Every human 



Right Plan— Fundamental Principles 171 

function has its peculiar laws and methods of 
successful operation. We have found, for example, 
that in the training of humanity in righteousness, 
certain specific laws of moral development must be 
observed. And the church that violates these laws 
does not accomplish its intended purpose. We have 
found also that there are certain specific methods 
of caring for the criminal, the delinquent and un- 
fortunate classes. For we are then dealing with 
people who are defective in body and mind and we 
need to exercise care and use methods peculiarly 
adapted to these classes, lest we do more harm than 
good. So also there are certain specific laws or 
principles that apply to the successful management 
and operation of our industrial activities. And 
unless we are careful to observe those laws or prin- 
ciples we cannot carry on our industries successfully. 
When, therefore, we say that in the reconstruc- 
tion of our industrial system, we must conduct our 
industrial activities after strictly business princi- 
ples, we mean that we must continue to observe 
those great principles which the past has shown to 
be necessary to the successful and just operation 
of our industrial enterprises. We must not, there- 
fore, apply to the industrial world those laws which 
we apply to our charities and corrections. We must 
not make our industrial system to be a charity 
organization where the indolent and the lazy can 
find fat jobs with little work. In our charities, our 
law is — "To each according to his needs." In our 
industrial activities, the law must be — "To each 
according to his deeds." So also every other prin- 



172 Capital and Profits 

ciple which experience has proved, or shall prove, 
to be necessary to the most efficient production and 
the just distribution of wealth must be strictly 
observed. 

We must also remember that every social change 
has its peculiar liability to abuses. And such will 
be the case with industrial democracy. Hence, 
we must, in introducing industrial reform, enact 
such rules and regulations as shall protect our 
industrial activities against those abuses to which 
they shall then be peculiarly liable. We shall 
thereby bring justice to each soul and efficiency 
into every part. 

Finally. — With the introduction of public owner- 
ship, an industrial institute should be established 
to instruct the people in the new responsibilities 
which public ownership brings. And a new eco- 
nomic science, based upon collective ownership, 
should be introduced into our public schools — with 
vocational training — so as to fit the new generations 
for the new industrial order and make them skilled 
workers within it. 

We have now unfolded the fundamental princi- 
ples on which we must build, if we would work out 
any effective measure or plan of industrial recon- 
struction and reform. Assuming these principles 
to be correct, what, we ask, is that concrete plan 
by which to embody these principles within our 
social order and achieve the next step in our in- 
dustrial evolution. This question we shall answer 
in the next chapter. 



CHAPTER XIII 

The Right Concrete Plan— Fundamental 
Demands 

ASSUMING that the principles affirmed in the 
preceding chapter are correct, and especially 
that the consolidated business corporation is the 
necessary agent of industrial management and con- 
trol, what are the fundamental demands which a 
sound economic science makes in order to achieve 
effective industrial reconstruction? How shall we 
introduce the true industrial commonwealth? 

First fundamental demand. — In order to 
remedy present wrongs, a sound economic science 
demands, first of all, that the government shall 
constitute the people, by legislative enactment, 
from town to nation, into a People's Consolidated 
Business Corporation, distinct from government, 
with authority to acquire, own and operate every 
industry which the welfare of the people may de- 
mand ; and it demands that every element of indus- 
trial responsibility and power shall be placed for- 
ever within the people's hands, and that, step by 
step, the whole industrial world shall be brought, 
by mandatory law, under their immediate, sovereign 
management and control. 

Our great industries — our railroads and telegraphs 
and telephones, our factories, our markets and stores, 

173 



174 Capital and Profits 

our mines and forests and other plants, — all belong 
of right to the whole people collectively. We always 
think of them as ours and speak of them as ours. 
When American shipping petitioned for free toll 
through the Panama canal, as against foreign ships, 
the plea was that American ships are our ships. 
Well, if they are ours, and they certainly should be 
ours, let us own them and permit them no longer 
to be the agents of special privilege and plunder. 
And we say the same thing of all our other great 
industries. We demand that the American people 
shall, indeed, own these industries themselves and 
make them the agents of the whole people for the 
profit not of the few alone, but of all. And since 
the grand organic agent of industrial consolidation 
and control is not the government but the consoli- 
dated business corporation, we demand that the 
whole people collectively shall acquire sovereign 
industrial control, not through the turning of our 
industries over to the government, but by making 
the people collectively to be the consolidated busi- 
ness corporation and turning all our industries over 
to their sovereign management and control. 

Here, for example, is a town held within the pre- 
daceous grasp of a private electric light corporation. 
How shall the people according to a sound economic 
science, free themselves from such predaceous grasp? 
To achieve this end we should not turn the electric 
light corporation over to the selectmen or mayor 
of the town, for these have not been elected for that 
purpose and it is unwise to mix political and indus- 
trial functions. But we must constitute the people, 



Right Plan— Fundamental Demands 175 

by law, into an electric light corporation, of which 
every man shall be a member, with authority to 
own and operate their own electric-lighting plant 
with justice and to the profit of all. In short, we 
demand that the people shall be their own electric 
light corporation. In no other way can they make 
themselves masters of the industry and get justice. 

But what shall be the organic structure or consti- 
tution of this people's corporation which the people 
shall create, and what powers shall be placed within 
the people's hands? 

The business corporation when rightly consti- 
tuted, embraces two essential factors. First, there are 
the stockholders or voting members. These own the 
plant, and constitute the sovereign body corporate. 
Second, there is the directorate or managing board. 
This is elected by the corporation to direct and 
manage the business as determined by the sovereign 
corporate will. 

Now the people's consolidated business corpora- 
tion must embrace the same two great organic 
factors. First, there must be the sovereign voting 
membership of the corporation. This must embrace 
the whole adult population of the community. 
And second, there must be the official board or 
directorate of the corporation, just as in the private 
corporation; but this must be chosen by the whole 
people, collectively, and shall be directly account- 
able to the people's sovereign will. 

And all power must be placed, finally and for- 
ever, within the people's hands. The people col- 
lectively, therefore, must own the plant; they must 



176 Capital and Profits 

be made to be responsible for the supply of the 
needed capital; they must elect the officials, espe- 
cially the official board of directors or president; 
they must fix all wages and salaries by some appro- 
priate method; and they must be, collectively, the 
business corporation; and the whole plant, in every 
industry, must be placed under their immediate 
sovereign ownership and control. 

Thus democracy, which has already acquired 
control of the government and education, shall now 
acquire supreme ownership and control of the con- 
solidated business corporation or trust, which is the 
institution created by our social evolution for that 
very purpose, and the whole industrial world shall 
be placed forever under the immediate sovereign 
ownership and control of the people. 

2. 

Second fundamental demand. — In order to 
remedy present wrongs, a sound economic science 
demands, in the second place, that the capital under 
this socialized business corporation, shall, in every 
case be individually subscribed and owned and that 
dividends shall be paid, just as in the private cor- 
poration; and it demands that each man shall be 
called upon and required, by law, to subscribe his 
due quota or share of the needed capital according 
to age and ability. 

This provision follows from what has already 
been explained in the preceding chapter. For the 
aggregate capital needed to run our industries must 
be raised. And if the whole people are to be the 



Right Plan— Fundamental Demands 177 

corporation and if each man is to be a sovereign 
responsible member of it, then the whole people 
collectively must supply the needed capital and each 
man must put in his due quota. The responsibility 
of each man must be commensurate with privilege 
and power. 

And every thrifty man will be able to subscribe 
his due quota of the needed capital. In the intro- 
duction of this plan all may not be able, indeed, to 
pay in their whole amount at once. But every man 
will be able to put in something and, given time, he 
will be able to get his full quota in. To do this, 
of course, will require thrift and forethought. But 
thrift and forethought are not bad things; indeed, 
the world will never, even under socialism or any 
other system, be able to prosper without the exer- 
cise of these virtues. 

But suppose that some person, through misfor- 
tune or sheer incapacity or willful wrong, simply 
will not work and, therefore, shall have nothing 
to pay, what shall we do? In such a case we shall 
do just as today in collecting taxes. We shall view 
such a man as a delinquent or defective, who through 
some cause cannot meet his . industrial obligations 
and privileges. And we shall have to count him 
out and supply his part of the needed capital in 
some other way. We shall invite the thrifty to 
put in a surplus in his place; or, this failing, we 
shall require the government to give its bond for 
the remainder. And so the whole amount of the 
required capital shall be supplied and the plant 
shall be taken over at once. 



178 Capital and Profits 

In the assessment and collection of the amount 
of capital required from each, we can, until a better 
method is discovered, proceed in the same way as 
we collect taxes today. 

In relation to dividends, a wise economic science 
will recommend and even demand, at least in the 
introduction of this plan, that the government shall 
guarantee a minimum dividend of at least five per 
cent; and permit the industries of the country to 
pay as much more than this as they are able, up 
to ten or twelve per cent. The government shall, 
of course, receive the dividends on the amount 
which it has subscribed, like any other investor. 
And those who have subscribed a surplus to take 
the place of delinquents shall receive the dividends 
earned by this surplus. 

The government guarantee shall also be placed 
behind every dollar invested. 

This twofold principle of the individual sub- 
scription of the capital and the payment of divi- 
dends, shall be universally insisted upon and every- 
where resolutely applied. Certain socialists have 
said — "Why insist upon any uniform rule in this 
matter? Why not make the question of dividends or 
non-dividends an open one and let the people apply 
one method in one place and another in another? " 
But such a hap-hazard policy will not do. The pay- 
ment of dividends and the individual subscription 
of the capital are imperative. No other method 
will work or be just and right. To abolish the 
individual subscription of the capital and the earn- 
ing of dividends will not only be destructive of 



Right Plan— Fundamental Demands 179 

individual responsibility for one's self but it will 
rob the worker, as it has been shown, and rob him 
outrageously. Dividends, therefore, must be re- 
tained and the capital must be individually sub- 
scribed and owned just as in the private corpora- 
tion. And this law must be applied everywhere. 
Such a policy alone will be firm, just and decisive. 
And such a policy alone will command success. 

3. 

Third fundamental demand. — In order to 
remedy present wrongs, a sound economic science 
demands, in the third place, that this people's cor- 
poration shall be thoroughly democratic in structure 
and administration; that it shall be governed by 
strictly business principles; that it shall be brought 
under such rules and regulations as are necessary 
to prevent abuses and bring efficiency into every 
function and justice to every soul; and that the 
whole shall be subordinate to the acquisition of 
individual wealth and gain. 

It is very easy to construct a people's business 
corporation and yet deprive the people in some way 
of sovereign power. Care, therefore, must be taken 
to make the whole structure and administration of 
the people's corporation strictly democratic. 

And it is surely important that the people's cor- 
poration shall be conducted after strictly business 
principles, as it has been shown. For the people's 
business corporation must be no charity organiza- 
tion, nor an apanage of the government to be used 
by political grafters. 



180 Capital and Profits 

And care must be taken to prevent those abuses 
to which industrial democracy is liable. This is 
also self-evident. 

Finally, the whole public business corporation 
must be subordinate to the acquisition of individual 
wealth and gain. 



But can these ends be achieved? Can rules and 
regulations be framed that will be adequate to keep 
the administration strictly within the hands of the 
people? Can we prevent graft and secure justice 
to all with efficiency in every function? 

Yes, we can, providing we will adopt those regula- 
tions which a sound economic science, guided by exper- 
ience, demands in order to achieve these ends. 

What are some of these regulations? 

First. — A sound economic science demands that 
the directors, or president, of each plant or industry 
shall be elected directly by the people and be made 
directly accountable to the people. Sound business 
principles will permit no other method of electing 
the managers of the people's corporation. The 
directors, therefore, shall not be appointed by the 
mayor nor by the governor, nor by the president of 
the United States. Efficiency and purity of admin- 
istration demand that the heads of the industrial 
and the political departments shall be kept entirely 
distinct and independent, administratively, from 
each other and made each directly responsible to 
the people. 

Furthermore, it should be a law that no man 



Right Plan— Fundamental Demands 181 

shall be a candidate for the directorate or presi- 
dency of any plant, unless he shall have been a 
graduate of some approved school of technology 
and business, and shall have served a prescribed 
term of years in certain lower positions sufficient 
to put his ability to the test. And the election of 
the directors should be held at a different time from 
the political elections that the minds of the people 
may be concentrated at the time upon this one thing. 
The directors or president should be elected for a 
term of from three to five years, subject to recall. 

It might also be wise to make it a law that every 
man shall be required to vote at the election of 
the directors, in order that a full vote shall be given 
at each election. But it might be a law that no 
man shall be allowed to vote for a director unless 
he has paid in at least a prescribed minimum 
part of his required capital. For in our recon- 
structed industries every thrifty man will be able 
to pay in his full quota or, at least, some part of 
it. And if any man is so indolent or vicious as to 
refuse to work and so be able to pay in nothing at 
all, it would seem to be just that he should be classed 
as a pauper and made to forfeit a part, at least, 
of his power as a member of the corporation. He 
might be allowed to vote on all other questions, 
but not on the election of a corporate director. 
But this is a debatable point which the majority 
must decide. 

Second. — A sound economic science demands that 
a board of commissioners on wages and salaries 
shall be annually chosen by the people to fix and 



182 Capital and Profits 

adjust wages and salaries according to justice. And 
it shall be a prescribed law that the consideration 
guiding this board shall be justice and not compe- 
tition. The question which the board should ask 
in determining the relative wages and salaries of 
all workers and officials should be — "What is each 
job relatively worth/' and not — "How cheap can we 
get the man. Ji And the aim should be to make the 
wages as high, and not as low as possible consistent 
with justice. For all of us shall be in the corpora- 
tion for the benefit not of a few but of all. And 
hence, we must make the wages of all, as well as 
the dividends, as high as possible. No man, there- 
fore, should ever lose a job simply because some 
other man offers to do it cheaper. The one ques- 
tion in every case should be, — what is this job 
honestly worth? And then the best man should be 
given the job. By this rule the people shall bring 
forever to an end that outrageous robbery of labor 
that prevails today, and they shall end that constant 
bringing in and perpetuating of the worst instead 
of the best classes — an evil which results from the 
law of always giving the job to the cheapest man.* 

A board of arbitration could also be wisely created 
in each factory or plant to protect individual work- 
men from unjust discrimination. 

Third. — A sound economic science demands that 
all prices shall be fixed by the directors, and that 

* See Reid's Effective Industrial Reform, Chapter IV, in 
which the rapidly deteriorating effect of the present competi- 
tive system upon the character of the population is fully ex- 
plained. — The Hazard Company. 



Right Plan— Fundamental Demands 183 

the law determining prices shall be to adjust them 
so as to obtain a return sufficient to pay the wages 
and salaries established by the commissioners, to 
meet all necessary expenses and pay a dividend, 
at least of five per cent and, if possible, as high as 
ten or twelve per cent on the invested capital. 

Fourth. — A sound economic science demands that 
the right of each man to invest equally with every 
other, according to age, shall be amply protected. 
For the subscription of capital is not only a duty but 
a privilege of which no man shall be deprived. The 
right to invest and earn the full product of one's 
capital equally with every one else shall be made 
as sacred and as jealously protected as the right 
to work and earn the full product of one's labor. 
And as no man should be allowed to be crowded 
out of his job, so no man should be allowed to be 
crowded out of his opportunity to invest. For this 
is one of the most flagrant causes of injustice in 
the present system. Either we cannot invest at 
all, or we are compelled to pay an immense bonus 
or premium to present holders of stock and so we 
are robbed of our earnings. 

And it will be very easy to secure justice in this 
matter by the use of a few simple provisions. To 
illustrate: Each man's investment can be classi- 
fied into required subscriptions and surplus bank 
deposits. Each man's required subscription should 
then be limited to a certain prescribed amount — 
corresponding to the aggregate capital of the coun- 
try. This will amount today, to an aggregate 
yearly subscription of from five hundred to six hun- 



184 Capital and Profits 

dred dollars per man and wife until the full aggregate 
amount for each couple, or fifteen thousand dollars, 
is in. Of course, with the increase of the wealth 
of the country, this aggregate required subscrip- 
tion shall be correspondingly increased. But there 
shall be no limit to the surplus which any man may 
deposit in the public bank — only this surplus shall 
draw no interest or dividends until the required 
subscriptions, actually paid in, are provided for. 
We can also permit investments to be withdrawn at 
any time at the option of the investor, providing 
the surplus deposits of others would permit it. But 
in all cases of withdrawal the money may be re- 
invested, at any following investment time, at the 
option of the investor. Furthermore, subscriptions 
must always be exactly at par. No man should be 
compelled to pay a premium in order to get his 
money invested in his country's industries. Hence, 
all so-called buying and selling of stocks or oppor- 
tunity to invest shall be rigidly prohibited. 

These measures for the protection of each man's 
right to invest equally with every one else, is an 
essential feature of our plan, upon which justice 
demands that we shall rigidly insist. Each man, 
therefore, shall be called upon to step up to the 
industrial office and pay in his capital. But if he 
cannot or will not do this, he shall not be allowed 
to sell his opportunity to a man of his own choos- 
ing; it shall go to the man who stands next on the 
subscription roll.. Thus we shall obtain justice in 
the opportunity to invest. 



Right Plan— Fundamental Demands 185 

Fifth. — A wise economic science demands that 
each man shall be permitted to convert his re- 
quired subscriptions into an annuity which shall 
yield a certain fixed and a certain variable income, 
— to be paid to himself or wife during life, or, at 
death, to his orphaned children until they become 
of age, or each investor may, so long as present 
laws of inheritance exist,* continue to draw his 
regular dividends and, at death, allow his capital to 
go to his heirs. But when a man dies justice demands 
that all his capital, if any remains, shall be paid 
in cash (or in the form of a surplus deposit) to his 
heirs. For when a man dies and his children are 
of age, his capital must go out of the industries of 
the country with him, to give place to the next 
generation. We shall thus prevent any man's 
loading his children upon the backs of the people 
to unending generations as is done today. And 
we shall secure to the next generation opportunity 
to invest equally with its predecessors. 

Sixth. — A sound economic science demands that 
the members of each new generation shall be called 
upon, when coming of age, to invest their regular 
quota, from year to year, and so take the place of 
those who die. Thus, the capital of the country 
shall be re-distributed according to justice with the 
coming of each new generation, and justice shall 
be done. 



* It is evident that the subject of inheritance should be re- 
considered. But we cannot solve every problem at once. And, 
hence, until our laws of inheritance are changed, the above rule 
will hold. 



186 Capital and Profits 

Seventh. — A just and wise economic science de- 
mands that the grand end to be ever kept in view 
by the people's corporation shall be three-fold, 
first, to provide every man with work, and pay 
him the full earnings of his labor; — second, to pro- 
vide all with all needed utilities and services at a 
fair price; — and third, to provide a place where 
each man can invest his savings in his country's 
industries, with safety, profit, and permanency, 
and thereby secure economic leisure and provide 
for sickness and old age. 

These three objects shall be ever kept in view 
and the whole business corporation shall be consti- 
tuted and administered so as to serve as the agent 
of the people in the acquisition of individual wealth 
with justice toward all. 

Eighth — Economic science demands that this 
plan shall be, of course, subject to amendment as 
wisdom and experience may teach. 

Finally. — A sound economic science demands that 
when this plan shall have been adopted by a ma- 
jority vote of the people and ordered by the gov- 
ernment to be applied to some particular industry, 
its introduction, then, shall be mandatory, like 
the public school or the United States mail. * Every 
man shall be required to invest the capital demanded 
of him and to stand or fall with the consolidated 
business corporation. This will constrain every man 

* Certain reviews of Effective Industrial Reform, by David 
C. Reid, have misrepresented its character as teaching a phase 
of " Christian Socialism " to be introduced by moral suasion, 
a thing which is impossible. 



Right Plan— Fundamental Demands 187 

to give his attention to the administration of the 
business and make the new plan a success. 

Such are some of the rules and regulations which 
a sound economic science demands and shall intro- 
duce. With the enactment of these and other ap- 
propriate rules it can be readily seen that the people 
can retain all power within their hands. Equal 
opportunity shall be given to every man both to 
work and to invest his savings in his country's 
industries. Every man will also receive the full 
product of his labor and the full earnings of his 
invested capital. Justice shall be maintained in 
relation to all prices and commodities and all goug- 
ing shall cease. 

5. 

Fourth Fundamental Demand. — A sound eco- 
nomic science demands that upon the introduction 
of this plan, a people's industrial institute shall be 
established to instruct the people, both in the principles 
of collective management and control, in general, 
and in the management and control of each plant 
in particular. The reason why democracy some- 
times fails is because no measures are introduced 
to keep the people instructed and alert in the 
specific duties which democracy entails. It is dem- 
ocracy plus an enlightened people that will save 
the world. Hence, upon the turning of the first 
plant over to the people as this plan contemplates, 
it is imperative that a permanent industrial insti- 
tute shall be established to instruct the people in 
the workings of this plan and of each plant and 



188 Capital and Profits 

enable the people to choose the right men for 
directors and secure the best of service. 

Furthermore, as soon as possible, the schools 
shall be correlated with this plan. The soundest 
economic training shall be introduced. The young 
people shall be instructed in the causes of wrong 
under the present system and the imperative need 
of collective ownership and democratic control in 
order to justice. They shall be taught the nature 
and function of capital as the true economic basis 
of life. They shall have explained to them the 
function of the consolidated business corporation as 
the agent of the whole people in the exercise of 
collective control. 

And the young shall be trained vocationally. 
The schools shall be correlated with our industries, 
as illustrated in the Cincinnati Union School. And 
every child shall be trained to be a skillful worker 
in his chosen vocation. By these methods we shall 
insure success in the operation of the new plan. 
For we shall not only have collective ownership and 
control of our industrial system, but also an en- 
lightened and trained people to put such collective 
ownership and control into effective operation. 

5. 

Such is the concrete method of industrial recon- 
struction which the lovers of justice must demand, 
— subject to such changes as experience may dic- 
tate, — if they would remedy present wrongs. 

The distinguishing characteristics — of this 
method are very plain. 



Right Plan— Fundamental Demands 189 

First. It differs from all other methods, in the 
emphasis which it places upon the consolidated 
business corporation, as the agent of industrial 
consolidation and collective control. 

Second. This plan embraces four principles: 
First, the collective ownership of the plant; second, 
the individual subscription of the capital and the 
earning of dividends; third, the democratic con- 
struction and management of the whole after strictly 
business principles with justice to all; and fourth, 
the industrial instruction of the people so as to in- 
sure success. 

6. 

Finally. This plan strictly obeys the laws of in- 
dustrial and social evolution. 

All evolution, individual and social, proceeds from 
within outwards and from lower to higher forms. 
When the Almighty created a bird, he did not 
create the bird de novo. But he took the saurian 
ancestor of the bird and transformed that into 
something higher. Its reptilian snout, the Almighty 
transformed into the beak of the bird; the reptilian 
forelimbs were transformed into wings; the scales 
were transformed into feathers, and every other 
organ went through the needed transformation until 
the bird appeared. 

Man's social evolution must proceed, and does 
proceed, rigidly, after the same method. No in- 
stitution ever appears de novo. In all progress 
there is always the transformation of the lower 
institution into something higher. There is never a 
break in the process. 



190 Capital and Profits 

It is, therefore, impossible for any man, however 
wise, to work out some new artificial plan of indus- 
trial reconstruction and impose that on society. 
We must, on the contrary, carefully search out that 
institution which evolution has already created to 
serve as the agent of industrial administration and 
control. And just as the Almighty took the fore- 
limbs of the ancient saurian and transformed them 
into wings, so we, in working out our industrial 
evolution, must take that particular institution 
which nature has already created to serve as the 
agent of industrial administration and control, and 
we must transform that into something higher and 
better. It was the failure to observe this law that 
caused such a striking failure on the part of social- 
ism in all attempts at industrial reconstruction in 
the past. 

Now it is this law which we strictly obey in this 
method which we are pursuing. For in this method 
we do not, like Marxists, make a complete break 
with the present system and all the past; nor do 
we launch out upon an absolutely new and untried 
sea without chart or compass. But we take the 
consolidated business corporation, which is, and 
always has been, the agent of industrial adminis- 
tration and control in a more or less developed form 
since the world began, and we carry that institu- 
tion up to its perfect evolution in the establishment 
of a real industrial democracy. And as industrial 
individualism and anarchism have been succeeded 
by industrial despotism, so now industrial despotism 
must be succeeded by industrial democracy. And 



Right Plan— Fundamental Demands 191 

this is the inevitable course of social evolution in 
almost every social function. 

Furthermore, this plan gathers up and organizes 
into one great whole all those separate and crude, 
but sincere, attempts to improve and perfect our 
present system today. That persistent attempt on 
the part of individuals, classes and communities, to 
introduce co-operative stores, manufactures, and 
even railroads; the opening of postal savings banks 
in order that every person may have an opportunity 
to invest his savings in his country's industries with 
perfect safety and permanency and with some degree 
of profit; the introduction of profit-sharing into many 
of our great corporations; the making of the worker 
to be a stockholder in the business; the proposals 
to establish commissions on wages and salaries to 
fix wages and salaries with justice; and even the 
so-called industrial commissions which aim to se- 
cure to the people some measure of control over 
the corporations — all of these separate suggested 
ways of reform are really embodied within and car- 
ried up to perfection and organized into one great 
whole, in that corporation plan of industrial recon- 
struction and reform which this book advocates. 
And this is another indication that this plan lies 
in the direction which our industrial evolution is 
taking. Lastly, this plan is the only method by 
which to realize all those specific demands which 
are made by the federation of churches and other 
organizations which are seeking for industrial and 
social justice. 



CHAPTER XIV 

Will This Plan Work? Is it Practicable? 

WHEN this plan is presented to an ordinary 
audience or to any one person for the first 
time, the most frequent comment is — " Your plan 
looks good, but is it practicable? Can it be put into 
operation? Particularly, will the people be able to 
raise and subscribe the capital as this plan requires? " 
A careful consideration of the subject yields a 
decidedly affirmative answer to all these inquiries. 
The plan is, indeed, most practicable; it will work; 
and it will produce the desired results. 

In the first place, the people will be easily able 
to raise the required capital, as this plan requires, 
and put the plan into speedy operation. 

One of the chief features in this scientific plan 
of industrial reconstruction is the demand that each 
citizen shall be called upon and required to sub- 
scribe his due quota of the needed capital. Now, 
it is right here where th3 first question mark is 
usually made. "What" some say, "do you expect 
that the mass of ignorant and destitute workers, the 
proletariate, shall be able to subscribe and pay in 
their due share of the required capital, as your plan 
contemplates?" 

To this inquiry economic science most calmly 
replies — that it most certainly does. And it main- 

192 



Will This Plan Work? 193 

tains that even at the first introduction of this 
plan practically every man, even among the pro- 
letariate, will be able to subscribe and pay in his 
due quota — only time will have to be given him 
to do it. 

Suppose, for example, that the city of Chicago 
should vote today to take over its street-car lines 
after this plan, how much capital would each 
man and wife be required to subscribe together 
in order to raise the needed aggregate capital? 
Only about one hundred dollars. For there are in 
round numbers four hundred thousand voters in 
the city and the whole capital required, free from 
water, is about forty million dollars. Hence, one 
hundred dollars from each voter would supply the 
whole aggregate capital required. 

Now, many of the proletariate, under present 
conditions, could not pay in this whole amount 
at once) but every man and wife could pay in a 
part of it, say, at least ten dollars, and gradually 
they could get their whole amount in. Thus a 
beginning could be made. Others could pay in 
a surplus or the city could be required to give its 
bond for the rest, to be held until the voters had 
got their whole amount in. The roads, therefore, 
could be taken over at once, and every man could 
gradually get all his due capital in. And so the road 
could be owned by the whole people collectively 
and every man could be a capitalist shareholder 
in the road, own his due share of the capital and 
reap, of course, his due share of the accruing divi- 
dends. 



194 Capital and Profits 

In like manner every other industry could be 
taken over, one by one, until the whole complex, 
industrial plant of this country, from town to na- 
tion, should be collectively owned, and every man 
should have in his due share of the required capital. 

Furthermore, it should be observed that as this 
process gradually proceeded, it would gradually be- 
come more and more easy for each man to subscribe 
and pay in his due quota. For with the gradual 
introduction of this plan the present terrible handi- 
caps of labor would be gradually removed. The 
first great handicap of the people, especially of the 
proletariate, is that they are underpaid, and, of 
course, this will make it hard, at first, before this 
wrong is removed, for each man to pay in his full 
required quota. The second handicap is that many 
of the people are economically ignorant. They do 
not grasp the true economic basis of life, which, 
as we have shown, is the individual acquisition and 
ownership of capital. Hence, many do not even try 
to save and invest capital when they could. The 
third handicap of the people, under the present 
system, is that many are untrained and do not earn 
one-half of what they could, if better trained. 

With these handicaps it is no wonder that many 
will find it difficult, at first, to pay in their due quota 
all at once. But with the gradual introduction of 
this plan, all these and other handicaps shall be 
removed. For with the gradual acquisition of col- 
lective ownership of the several plants of the coun- 
try, we shall gradually reduce the big salaries of 
the men at the top, eliminate the wastes and the 



Will This Plan Work? 195 

dividends now paid on watered stock and all graft, 
and we shall be able thereby to gradually increase 
the wages of the men at the bottom, until every 
man shall receive the full product of his labor. 

And the very process of promoting this plan, and 
its operation, when it is once introduced, will tend 
to make every worker economically alert and eager 
to put in his due share of the required capital. The 
very coming of the assessor to his door once a year 
or once a month for his due amount and the lure 
of big dividends which all will then receive, will 
make every worker eager and alert to get in his 
full quota and earn his full share of the dividends. 
Thus, the second great handicap, the economic 
ignorance of the worker, shall be removed. And 
the third handicap will go also. For it is an essen- 
tial feature of this plan to introduce economic and 
vocational training in the public schools and to 
correlate the schools with the industrial system in 
something the same way as is done in the Union 
School in Cincinnati today. The result will be 
that every child will come to adult life alert and 
fully trained for some vocation and able to make 
good in his struggle for bread. 

Thus, the gradual introduction of this plan will 
gradually remove every handicap which now op- 
presses the worker. And when, as a result of this, 
we shall have not only a just industrial system, but 
also an alert and a skilled people, able to know their 
rights and duties, and able to maintain the one 
and perform the other, what intelligent man can 
doubt for a moment that the people will be able, 



196 Capital and Profits 

not only to own collectively every plant, but also 
to subscribe individually, each, his due quota of 
the required capital and so make the plan a glo- 
rious success and bring abundance and justice to all? 
It can be maintained, therefore, that this plan 
is perfectly practicable so far as the raising of the 
requi ed capital by the people individually is con- 
cerned. 

2. 

But will not evils creep in? In particular, will 
not this plan invite shiftlessness on the part of 
workers and officials, — will there not be a lack of 
that discipline and strenuous effort which so char- 
acterizes the private corporation of today and is 
necessary to the greatest production? 

No. For under this plan every man will be in- 
cited to do his best and each man will require of 
his fellow worker that he shall do his best. For 
in this plan, every worker and every citizen will 
be an investor in the public corporation and will 
have his dividends at stake. The result will be 
that everybody will demand that every official 
shall look after the plant and that every worker 
shall do his best and make the plant pay as big a 
profit as possible. Every worker in each plant will 
watch his fellow workers and he will say to the 
fellow worker who is inclined to shirk — " You must 
do better work or take lower pay." And the workers 
will even complain of their officials and demand 
their recall, when those officials fail in requiring 
even of the workers themselves the full measure of 
faithful effort. Just as a baseball team demands 



Will This Plan Work? 197 

that their captain shall keep them up to the highest 
degree of efficiency and secure the greatest results, 
so, under this new plan all the workers, with few 
exceptions, will want their boss to keep them up 
to the highest degree of efficiency and produce the 
greatest results. 

When every man and woman in the community 
is a member of the corporation and has his and her 
capital invested and dividends at stake and when 
the lure of increased wealth is before them, we may 
be sure that the whole community will demand the 
best effort of every one of its members, and the 
best efforts shall be given. 

This result becomes certain when we take into 
account the work of the people's industrial institute, 
which is an essential part of our plan. For the 
specific purpose of this institute will be to keep the 
people alert, secure the election of the most com- 
petent officials and maintain that discipline and 
strenuous effort which brings success. 

But will it not be possible, under this plan, for 
the idle and shiftless, in some way, to load themselves 
onto the backs of the industrious — a thing which 
many cautious persons fear under public ownership? 

No. For under this plan we shall keep a careful 
record of the amount of work that each man does 
and pay him only for the work which he performs; 
we shall require each man to pay justly for all that 
he buys, and we shall keep a careful record of all 
that each man invests and pay him dividends only 
on the money that he has invested. And under 
this plan, there will be no free pensions. Where, 



198 Capital and Profits 

then, will there be any possible opportunity for 
the idle and shiftless classes forcibly or covertly to 
load themselves upon the backs of the thrifty and 
industrious? 

Will it not be possible for the incompetent to 
vault into control and ruin the business? Said a 
certain business man — "If we should adopt public 
ownership, the cronies of Tom Quinn " — naming an 
incompetent fellow of the town, — "would elect him 
to the presidency and the business would be ruined 
within a month." Is not this objection sound? 

No. Such a thing would be simply an impossi- 
bility under the plan which this book proposes. 
For, in the first place, in this plan, no one will be 
permitted to be a candidate for the directorship 
or presidency unless he has been a graduate of 
some prescribed school of business and technology 
fitting him for the place, and shall also have occu- 
pied certain prescribed lower positions for a term 
of years adequate to put his abilities to the test. 
No person, therefore, like Tom Quinn could ever 
become even a candidate for any office in the cor- 
poration. 

And, second, this plan will create such an indi- 
vidual interest and sense of responsibility on the 
part of each voter, — for every voter will be a sov- 
ereign, capitalist factor in the new business cor- 
poration, — as to preclude the possibility of any 
incompetent person's being elected to any office of 
responsibility or, if elected, he will be speedily 
recalled. For every person — the busy housewife, 
the keen and alert business man, the thrifty worker, 



Will This Plan Work? 199 

— all will have their savings invested in this consol- 
idated business corporation, and wages and sala- 
ries and prices and dividends will all depend upon 
the competence of the directors in control. Each 
person will stand or fall with the business corpora- 
tion. Hence, on the least lowering of dividends or 
the least rise in prices, or the least lowering of wages 
and salaries, there will be an outcry at once from the 
whole people, and the incompetent person will be per- 
emptorily recalled. 

Objections have been made to industrial democ- 
racy and public ownership on the ground that 
before it can be made successful, we will have to 
"reform Tammany " or "change the government " or 
"rejorm human nature.'" 

But under this plan our business system will 
have no connection with Tammany, and while like 
the public school it shall be introduced and en- 
forced by law, yet there will be no administrative 
connection between this plan and any government 
official whatsoever; neither will it require any 
change in human nature to make this plan success- 
ful. For this plan will be in perfect accord with 
human nature. Indeed, instead of having to do 
any of these things which objectors indicate, it is 
the introduction of this plan that will put Tam- 
many out of business, reform the government, and 
effect the regeneration of the nature of man. 

3. 
Objection has been made to industrial democracy 
on the sweeping charge that, under public owner- 



200 Capital and Profits 

ship business has never been so successfully con- 
ducted as under private ownership. 

Even if this charge be true, it will not apply to 
this plan which this book proposes. In every form 
of public ownership tried hitherto, the investment 
of individual capital and the earning of dividends, 
which is the chief incentive to watchfulness and 
care, have been completely eliminated. Often the 
money for the building of the plant is not even 
taken out of the public treasury, but raised by 
bonding the municipality and so loading the cost 
upon future generations. The result is that in nearly 
every public enterprise today nobody has anything 
at stake. The voter has no capital invested in the 
enterprise and no dividends at stake; not even his 
taxes nor the price which he will have to pay for 
the service to be rendered will be affected by either 
the cost of the plant or the cost of running it. The 
result is that jobbery and inefficiency creep in to 
an appalling extent. 

But in the plan which this book proposes, all 
these sources of corruption shall be removed. For 
under this plan every plant will be not only an 
agent of public service, but also a clear business 
proposition in relation to each citizen for the earning 
of an income. Suppose that a certain city should 
propose to build a system of water-works for the 
public, after our plan, how will that plant be viewed? 
It will be viewed, indeed, as the agent by which 
to perform a service for the public, but it will be 
also viewed as a business enterprise for the benefit 
of each citizen individually for the investment of cap- 



Will This Plan Work? 201 

ital and the earning of a new income which w 11 
accrue as a just return for the service which his in- 
vested capital will render. Furthermore, the amount 
of income to each man will depend upon the 
economy and efficiency with which the plant is built 
and run, just as in any private business today. The 
less the cost of building and running the plant, con- 
sistent with durability and efficiency, the greater the 
relative income to each investor and the less the 
liability to loss and failure. When, therefore, under 
this plan, the municipality shall vote to build a 
system of water-works, the new plant will be viewed 
not only as a means of public service but also of 
individual profit; and, hence, every man will be 
on the alert to see that the new plant shall be built 
and run as economically as is consistent with dura- 
bility and efficient service. The result will be that 
under this plan all jobbery and inefficiency shall 
be eliminated both from the construction of the 
plant and from its management. 

This result becomes certain when we take into 
account the work of the people's industrial institute 
the specific duty of which shall be to keep the people 
alert and well informed, and secure the most intelli- 
gent and skillful service. 

4. 

The adoption of this plan will overthrow indus- 
trial autocracy, root and branch, and destroy for- 
ever every element of its power. 

The power of the capitalist class to oppress under 
the present system lies in the fact that this class 



202 Capital and Profits 

possesses unlimited and irresponsible power of con- 
trol. This class fixes all salaries and takes to itself 
the lion's share; it fixes all prices and dividends 
and, thereby, exacts boundless tribute; it deter- 
mines who shall work and who not; and it controls 
all investments and robs the investor of both divi- 
dends and capital. But the adoption of our plan 
will take away from the capitalist class every one 
of these elements of power and place them forever 
within the hands of the people. Hence, all gouging 
will cease and justice shall be done. And there 
will be no possibility of a return of autocracy so 
long as this plan endures. For the whole people 
will constitute the voting membership of the con- 
solidated business corporation and all power shall 
be placed forever within their hands. 

But will not abuses creep in? Yes, to some 
extent, especially at first. For the adoption of 
every new social process involves new complica- 
tions which we cannot foresee, and, with new com- 
plications new abuses will, at first, arise. But under 
this new system, full power to remedy every abuse 
will be within the people's hands. Under the present 
system we experience the most terrible abuses and 
wrongs, but the people are helpless. Take the 
New York and New Haven Railroad in the year 
1913. Not only had the stocks in that road depre- 
ciated until they were not worth thirty cents on 
the dollar as compared with a few years previously, 
but in the last half of 1913 the road paid no divi- 
dends at all. Think what that meant to the thou- 
sands of widows, aged people and others whose 



Will This Plan Work? 203 

whole property was invested in the road and who 
were dependent upon their dividends for support? 
And yet the people were utterly helpless in the face 
of those wrongs. For they possessed practically no 
control whatever over the road in which their money 
was invested. The officials continued, therefore, to 
draw their big salaries just as before. The presi- 
dent continued to draw a salary of one hundred 
thousand dollars a year and each of his many 
vice-presidents fifty thousand dollars a year, and 
yet the people whose money was invested in the 
road could receive no dividends at all. They had 
to submit to be plundered, until such time as their 
masters might deign to throw them a pittance. 

Now, without doubt, under the new system, some 
abuses will occur. For although under a true 
democratic management such outrageous wrongs as 
occur under the present system can never take place, 
yet, doubtlessly, some evils will creep in. But when 
these evils come, the remedy will be held completely 
within the people's hands. For the people and not 
a small group of irresponsible men, will own the 
road. They will invest the capital, they will elect 
the officials and they will determine the salaries of 
those officials and direct the whole policy of the 
road. And the people's industrial institute will serve 
as the people's watch-dog to keep the people alert. 
With the first appearance, therefore, of incom- 
petence or fraud every official can be called to 
account and dismissed and every abuse will be im- 
mediately rectified. For the people will be abso- 
lutely supreme over the corporation. Every regu- 



204 Capital and Profits 

lation will be devised to make and keep them su- 
preme. And when both their capital and dividends 
are at stake, the people will quickly get onto their 
job and will inevitably direct all for the equal 
good of all. 

And this plan will emancipate the workers. This 
truth needs to be emphasized, for it is the workers 
who are concerned in the largest numbers in the 
reform of present evil conditions. This plan will 
emancipate them, for this plan will make every 
worker to be a sovereign capitalist factor in the 
new business corporation and, therefore, the equal 
of everyone else. Indeed, under this new plan there 
cannot exist a distinct working class and a capitalist 
class, specifically so-called. For under the new plan 
all will be workers and all will be capitalists alike. 
Thus the present distinction between workers and 
capitalist class shall inevitably disappear. All will 
possess equal sovereign power and all will be equally 
masters of the corporation. Hence, when once we 
make the people collectively to be the business 
corporation, as this plan requires, it means that 
for the first time in human history the so-called 
workers shall become, with the rest of the people, 
industrially supreme. They will be each equal in 
power with everyone else. There will be no longer 
a ruling class and a dependent class. All will be 
rulers, collectively, in the industrial world. 

5. 

And this plan will not be at all communistic in 
character. It will be, indeed, no more communistic 



Will This Plan Work? 205 

than the present system. It will not destroy, but 
increase and spread more widely, the individual 
ownership of capital. And it will intensify that 
sense of independence and power which the indi- 
vidual ownership of capital gives. It will enable 
every man to strike his roots deep down into the 
very foundations of the material wealth of this 
country and make him strong and independent. 

For while under this plan all will be members of 
the people's business corporation, yet each man will 
be in it as an individual investor and shareholder, 
just as in the private corporation today. Hence, 
the whole of the savings which each man shall 
invest in the corporation will be as fully and indi- 
vidually his as now. The only difference will be 
that now his money is invested in a private corpo- 
ration where it is subject to pilfering and robbery. 
But under the new plan his savings will be invested 
in the public business corporation where every 
dollar will be perfectly safe and his dividends per- 
fectly secure. Every man, therefore, under this 
new plan will have all that economic independence 
and sense of power that the ownership of indi- 
vidualized capital gives. 

And this plan will perform every economic func- 
tion, meet every economic need and contribute to 
the production of individual wealth for all. 

For first, it will provide every man with work 
at a just wage and give every man the full product 
of his labor. Second, it will supply all men with 
all needed utilities at a fair price. And third, it 
will provide every man a place where he can invest 



206 Capital and Profits 

his increasing savings in his country's industries 
with safety, profit and permanency. 

The adoption of this plan, therefore, will bring 
wealth to every thrifty man and enable him to 
attain to economic independence at forty-five years 
of age. The only person that could interfere with 
the power of any man to attain to wealth under the 
operation of this plan will be the man himself, by his 
own lack of thrift and other vices. Two considera- 
tions make this evident. The first is that even if 
the wealth of this country should not be increased, 
yet, under this plan, every thrifty man will be able 
to acquire at forty-five years of age, fifteen thousand 
dollars' worth of the aggregate required capital of the 
country. For this will represent the just amount 
of the required capital due from each. For if the 
wealth of this country today was distributed justly, 
according to age and thrift, it would give to each 
thrifty worker and wife, at forty-five and older, 
on the average, at least fifteen thousand dollars. 
And it can be said that that thrifty couple who 
today possesses nothing at forty-five years of age, 
has been robbed, in some way, of that amount of 
the capital of the country. 

But second, under the operation of this plan all 
invested capital can easily earn, and shall earn, a 
dividend of at least ten per cent. But what will 
this mean? It will mean that the income of each 
man and wife above their salary at forty-five years 
of age, will be at least fifteen hundred dollars a year, 
a sum sufficient to support them in independence 
during the rest of their days. 



Will This Plan Work? 207 

But this is not the whole story. For with the 
rapid increase of the aggregate wealth of this coun- 
try these amounts will be greatly increased. And, 
furthermore, every thrifty man and wife will be 
able, if they so desire, to save and invest a surplus 
far beyond their required subscriptions, so that 
their income can be indefinitely enlarged. 

6. 

This plan will, therefore, work. It is practicable 
and every factor in it is capable of being defended. 
It is in perfect accord with economic law and eco- 
nomic evolution and it will meet every economic 
need. It is not, therefore, like Marxism, a sudden 
break from all connection with the preceding course 
of development. On the contrary, it takes our 
present industrial system, the consolidated business 
corporation, at its present stage of evolution and 
carries it up to the next stage. It simply transfers 
our system from the control of autocracy to the 
control of democracy; but the great economic 
factors are the same. 

The adoption of this plan will, therefore, remedy 
present wrongs. It will abolish poverty and every 
other economic evil. It will abolish forever the war- 
fare between capital and labor; for this plan will 
make every worker to be both capitalist and laborer 
and no man will go to war with himself. It will 
abolish political corruption so far as political cor- 
ruption is the product of industrial corruption. It 
will preserve the home by giving it an adequate eco- 
nomic foundation on which to exist. 



208 Capital and Profits 

And this plan will convert the struggle for bread 
and wealth from being, as it is today, a fierce com- 
petitive battle, in which the strong contend with 
the strong and the people are ruthlessly trampled 
under foot, into a vigorous yet co-operative effort. 
And while this plan will be conducted on strictly 
business principles and will make every man do 
his part and be responsible for himself, yet it will 
make JUSTICE to be the fundamental law of all 
industrial activity. It will constrain all to work 
together as comrades and brethren in obtaining for 
each his full share of life's utilities, and oppress none. 

Thus it can be seen that industrial democracy, 
as advocated by this plan, is perfectly practicable, 
and that every wrong resulting from the present 
anarchistic and yet autocratic system can be cured. 
Since this is so, for any man to plead for a contin- 
uation of the present system of injustice and plun- 
der is the height of servility and folly. Such a man 
is better fitted to live in despotic Russia than to 
be a free citizen of these United States. 

In conclusion it should be said that this making 
of the people to be the consolidated business cor- 
poration, as this plan contemplates, is the next 
inevitable step in the march of democracy in its 
acquisition of supremacy over the whole social order. 

Through the long ages of the past, the great mass 
of the people have been asleep and the astute and 
the sagacious have seized control of the whole social 
order, — of government, of education and religion, 
of the industrial system, of medicine and sanitation, 
of the very recreations and social life of the people. 



Will This Plan Work? 209 

And through these they have oppressed and plun- 
dered the people without mercy. But the people 
are beginning to awake from this long slumber. 
They are beginning to demand that these conditions 
of wrong shall come to an end. And it is a fact that 
human progress proceeds just in proportion and only 
in proportion as the people thus awake and be- 
come the intelligent masters of the whole social 
order. Progress in civilization and progress in 
social democracy are exactly co-extensive. 

When democracy, therefore, acquired control of 
the government as it has in several nations, it took 
the first step toward securing control of the whole 
social order. When it acquired control of the public 
school and thereby secured control of education, it 
took a second step. And now the people are de- 
manding that a third step be taken, namely, that 
the people shall acquire control of the whole indus- 
trial system. When, therefore, the people shall 
acquire supreme control of the consolidated busi- 
ness corporation — which is the agent of industrial 
administration and control — they shall have taken 
the next inevitable step in the extension of democ- 
racy over the whole social order. And this will be 
a most important step; for when once this step is 
taken it will speedily prepare the way for the rapid 
enthronement of the will of the people over every 
other part of the social order and then justice and 
good-will will reign everywhere and all exploita- 
tion and injustice and wrong shall cease. 

This book, therefore, appeals to all who are 
dissatisfied with the present system of iniquity and 



210 Capital and Profits 

plunder, to all lovers of justice and lovers of human- 
ity, to all who believe in building up a just society 
on earth, and especially to all workers, who by vir- 
tue of their numbers hold the scepter of power in 
their hands, and this book urges them carefully to 
examine the plan of industrial reconstruction pre- 
sented here and see if it is not the true plan. And 
if they find that it is, will they not unite in its pro- 
motion. And that party which truly seeks to achieve 
industrial reconstruction, — whatever be that party's 
name — is urged also to examine the measure of re- 
construction which is here proposed and if it is the 
true measure, let the party of reconstruction adopt 
it in its platform and demand such an amendment 
to the constitution of the several states and of the 
United States as shall put this plan into immediate 
and universal operation. 



CHAPTER XV 

How to Introduce This Plan 

BUT how shall this plan be introduced? In par- 
ticular how shall the present industries be 
taken over with justice toward all? 

This plan will probably be introduced little by- 
little, step by step. First some town or city will 
apply this plan to its street cars or water works or 
electric-lighting plant. Then some other town or 
city will follow this example, and these will be 
followed, in turn, by still others. Then some state 
or group of states will apply this plan to its rail- 
roads and other transportation industries. Then 
the United States will be likely to apply it to all 
the transportation system and communication sys- 
tem of the country. Then other industries shall 
be taken over, one by one. Our mines, Standard 
oil and our forests shall follow. And so, step by 
step, one industry after another will be taken over 
by the people, until our whole industrial system, 
from town to nation, shall be brought under the 
sovereign ownership and control of the people, 
organized into a single vast business corporation for 
that end. 

But what are the specific steps by which this 
task shall be actually achieved? In particular, how 

211 



212 Capital and Profits 

shall these industries, that already exist and are 
owned by private owners, be taken over and con- 
verted into the property of the socialized business 
corporation? This question brings me to a second 
proposition. 

Justice demands that all private industries shall 
be taken over by honest purchase, according to the 
true meaning of the term. For justice cannot ad- 
vocate any universal process of confiscation, unless 
of course, the oligarchy in power should fairly 
force upon the country a bloody civil war. In that 
case, all that we could do would be to confiscate 
much of the great wealth of the country and re- 
distribute it according to some principle of equity. 
But it is not probable that any bloody civil war or 
revolution will take place. The oligarchy now in 
power shows signs of being already in a condition 
of fright. Its members see the handwriting on the 
wall. For they know that their vast fortunes are 
the product of one vast gouge. And already they 
see that the people are beginning to awake and 
demand restitution and reform. And when the 
people once arise and speak the word, the oligarchy 
in power will retire from the field without any 
bloody struggle. 

Assuming, then, that the great revolution shall 
be a peaceful one, justice demands that all the 
great industrial plants shall be taken over, not 
by confiscation, but by honest purchase. 

But what is meant by " honest purchase? " 



How to Introduce This Plan 213 

By " honest purchase " it is meant, in the first 
place, that every person who has honestly invested 
honestly acquired money in our great industries 
shall be protected in the ownership of every dollar 
that he has put in. No honest investor need enter- 
tain, therefore, any fear that he will in any wise 
lose his possession by the transfer of privately 
owned plants over into the possession of the people 
as this plan requires. Widows, orphans, working 
men, teachers in our schools and all other persons 
who constitute >he class of really honest investors, 
shall be absolutely protected in their possessions. 

But, secondly, by " honest purchase " it is not 
meant that we must pay for watered stock. Mr. 
Lawson declares that of the sixty billions of " stock " 
held in this country, some thirty-nine billions are 
clear water. Now, assuming that this declaration 
is true, an honest purchase does not demand that 
we should pay for this vast amount of water. This 
water must be squeezed out. 

Thirdly, neither does " honest purchase " demand 
that we should pay back to the holders of vast 
fortunes that part of their wealth that has been 
clearly gotten by fraud or dishonest manipulation. 
It can be clearly proven that billions of dollars of 
money have been taken from the people by methods 
which are no better than a clear steal. When, for 
example, a certain railroad president took some 
twenty millions out of funds raised for improvement 
bonds and appropriated them to his private purse, 



214 Capital and Profits 

that was a clear case of fraud. Money clearly 
gotten by fraudulent methods we shall be perfectly 
justified in withholding from the present " posses- 
sors " and in returning it, or distributing it, in the 
form of capital to those to whom it more rightly 
belongs. 

Fourthly, honest purchase means that it will be 
perfectly just to take those funds that have been 
gotten by their present holders by fraud, and use 
them in compensating especially aged working men 
and women who have been despoiled by the present 
evil system. We shall, thereby, enable the latter 
to make that investment of capital which the new 
plan will require of them. In short, it would be 
perfectly just to take that money that has been 
clearly gotten by fraud and, instead of returning 
it to the present holders, bestow it, in the form of 
invested capital, upon those aged men and women 
who have been plundered and made helpless by 
the present system. 

In order to achieve this work with perfect jus- 
tice the people should create a Board of Equity 
which, when the proper time has come, shall adjust 
all claims and so bring justice to every person 
concerned. 

Such seem to be the chief factors implied in the 
taking over of our privately owned industries by 
honest purchase. 

Having thus decided the general method of 
taking over the private industries, what are the 



How to Introduce This Plan 215 

several concrete steps to be taken in the actual 
process? 

As soon as the people have voted to adopt the 
plan advocated in this book, and decided what 
particular industry first to take over, the first step 
would be for the people to elect an expert Commis- 
sion of Appraisal, to ascertain the true valuation 
of the plant to be acquired; also to choose a Board 
of Equity, as indicated above, to ascertain to whom 
the purchase money in each case is to be paid, 
that is, whether wholly to the present holders of 
the stock or, in part, to someone else from whom 
it has been unjustly taken. 

Then the government should call upon the citi- 
zens to subscribe severally the amount demanded 
from each in order to take over the contemplated 
industry, — giving each time, if unable to pay all 
at once. The government shall then make up any 
deficit by giving its bond for the balance. 

This money shall then be paid over to those to 
whom it properly belongs, as the Board of Equity 
with government approval, shall direct. 

The people shall then be called upon to elect 
their board of directors and the industry shall at 
once be turned over to their administration as the 
new plan shall require. 

Thus, every industry could be taken over one 
by one. The people might well begin with our 
water works and electric lights, and they could 
then proceed to take over our railroads and other 
systems of transportation, with all telegraphs and 
telephones. Then all those industries intimately 



216 Capital and Profits 

connected with these transportation and communi- 
cation industries could be taken over. And so 
we could proceed, step by step, until the whole 
industrial world was transferred from private owner- 
ship to collective ownership; and our industrial 
activities should no longer be the agents of graft 
and private gain, but the agents of the whole people 
in the acquisition of wealth with justice to all. 



INDEX 



Anarchistic basis of present indus- 
trial system, 9, 143. 
This anarchistic basis the first 
organic cause of present in- 
dustrial wrongs, 143-146. 



Business principles, 

Must govern administration of 
our reconstructed industries, 
137, 171, 179. 



Capital, 

True definition of, 26-29. 
Marx's definition of, 22-26. 
Its productivity, 37-41. 
Produces a "surplus value" above 

its cost and care, 40. 
Capital can "breed capital," 42- 

44. 
Ability to use capital the source 

of man's superiority over the 

brute, 44. 
Profits on capital legitimate, 47- 

49. 
An income from capital a needed 

factor in every life, 63-67, 85- 

93. 
Under a true socialism capital 

must be individually subscribed 

and owned, 69-73. 
Principle determining the rewards 

of capital, 78-84. 
The secure possession of capital 

the true economic basis of 

life, 95-99. 



Capital — Continued 

Discovery of use of capital marked 

the beginnings of civilization, 

39. 
Productivity of capital lays the 

foundation of civilization, 85. 
Capital serves two functions, 103. 
Capital and profits, 

Statement of problem concern- 
ing, 10. 
Two views as to legitimacy, 11. 
Marxist view, 11. 
View of modern economic science, 

13. 
Marxist view and that of eco- 
nomic science contradictory, 

14-16. 
Every proposed reconstruction 

of industries adopts Marxist 

view, 17. 
United States mail based upon 

the Marxist principle, 18. 
Whole socialist party adopts 

Marxist view, 19. 
Capitalists and capitalism, defined, 

31, 32. 
Causes of present industrial wrongs, 

139-158. 
Explanation given by Marx, 131. 
True causes, — first, crude social 

ideal and crude social science, 

139-141. 
Second, economic ignorance and 

lack of vocational training, 

141-143. 
Third, individualistic basis of 

present system, 143-146. 
Fourth, industrial autocracy, 146- 

153. 



217 



218 



Capital and Profits 



Civilization, 

Its functions can be carried on 
only by the combined action 
of capital and labor, 52. 
Consolidated business corporation, 
the, 

Its origin, 148-150. 

No piratical thing, but a legiti- 
mate part of the social order, 
148-150, 166. 

Relation to industrial democracy, 
166, 167. 

Its place in industrial reconstruc- 
tion, 165-167. 

Its tremendous power, 150-151, 
153-154. 

Should be owned by the whole 
people collectively, 151. 

See also " People's Consolidated 
Business Corporation." 



Dividends, 

Marxists and socialists repudiate, 

48. 
Definition and nature of, 58, 132. 
Nature and validity of, 72, 73. 
They are legitimate, 58. 
Dividends and wages not a 

source of evil, 135. 
The payment of dividends (and 

wages) the bulwark of justice, 

138. 
Dividends must be paid under a 

true socialism, 69-72, 100-101. 



Economic basis of life, 

Marxist teaching concerning, 94- 

95. 
The chief economic basis of life 
not labor but capital, 95-98. 
Economic leisure — how secured, 92- 

93. 
Economics, the new, — its three 
factors, 148. 



Equal opportunity to invest, 

How secured under People's Busi- 
ness Corporation, 183-184. 



False economic science prima) 
cause of present wrongs, 139- 
141. 

I 
Income, — two sources of, capital 
and labor, 63-67. 
These two sources to be care 

fully distinguished, 67-73. 
May accrue in form of money or 
direct service, 27-28. 
Industrial democracy, 

Must displace both industrial 
anarchism and despotism, 157- 
158. 
Must come through People's 
Consolidated Business Corpor- 
ation, 165-167, 174. 
Industrial reconstruction, 
Basic principles of, 162-172. 
Scientific demands for, 173-180. 
Need of a concrete plan, 161-162. 
Must retain capital and profits 

in, 167-169. 
Must obey laws of social evolu- 
tion, 189-190. 
Industrial system, 

Three functions which every 
system must perform, 99, 100. 
Interest, — defined, 57. 
Legitimate, 57. 

Marxists and socialists repudi- 
ate, 37, 48. 
Industrial institutes, 

Established under new plan, 186. 
Introduction of new plan, 

How achieved, 210-215. 
Investing one's savings for an in- 
come, 
Marxism and socialist party avow 

determination to abolish, 48. 
How secure equal opportunity to 
invest under new plan, 183-184. 



Index 



219 



Labor and labor-power, 

Defined, 26. 

Labor and capital belong to same 
category, 28-29. 

Labor not the only source of in- 
come, 63-67. 

Labor not the chief economic 
basis of life, 94-99. 

Law determining the compensa- 
tion of labor, 79. 



M 

Man to live not so much by labor 

as by capital, 44, 94-99. 
Marx and Marxism, 

To be distinguished from a true 
socialism, (Introduction), 5. 

Repudiates profits — rents, inter- 
est and dividends, 11-13. 

All members of socialist party at 
present are Marxists, 19. 

Declare all profits to be robbery, 
19. 

Marx's definition of capital, 22- 
26. 

Marxists deny productivity of 
capital, 41. 

Marxism, if rigidly applied, will 
result in great injustice, 111- 
119. 

Marxists advocate pensions to 
take place of dividends, 120- 
121. 

Socialist party cannot solve in- 
dustrial problem until it repu- 
diates Marxist economics, 21, 
130. 
Marxist economics, 

Actual effects of, 111-119. 

Results in equal division of un- 
equal earnings, 114-115. 

Will force men to supply capital 
surreptitiously, 112-113. 

Will rob the worker of just divi- 
dends, 114-115. 



Marxist economics — Continued 

Will rob the worker of his capi- 
tal, 116. 

Will bring an old age of poverty, 
116-117. 

Will make men spendthrifts and 
misers, 118. 

Will destroy civilization, 119. 



Old age, — how provided for in new 

plan, 91-92. 
Oligarchy, industrial, 

Now rules the industrial world, 
152-155. 

Origin of, and how it obtained its 
power, 152-153. 

Works through consolidated busi- 
ness corporation, 152. 

Elements of power, 153-154. 

It must be abolished, 162-165. 



Pensions, 

A Marxist substitute for divi- 
dends, 120-121. 

But they are dividends in dis- 
guise, 121-122. 

They destroy individual responsi- 
bility, 122-124. 

Evil effects of pension system, 
123-130. 

No adequate substitute for divi- 
dends, 123-130. 

Encourage shirking, 124. 

Enable the idle to load themselves 
upon the backs of industrious, 
126. 

Encourage worst elements of 
human nature, 125-126. 

Not desired by normally consti- 
tuted people, 128. 
People's Consolidated Business Cor- 
poration, 

To be created by law, 173-187, 
176-179. 



220 



Capital and Profits 



People's Consolidated Business Cor- 
poration — Continued 

Constitution of, 175. 

Capital and dividends under, 
167-168, 176-179 

To be administratively distinct 
from government, 169-170, 180. 

Special regulations to govern it, 
180-189. 

The only true agent of indus- 
trial democracy, 166, 167. 

Not communistic, 204. 

Will overthrow industrial autoc- 
racy, 201. 

Will emancipate the workers, 203. 

Will bring wealth to all, 205-206. 

How introduced, 210-215. 
Periods of life, three, 90-91. 

How the third period is provided 
for, 91-93. 
Plunderer, the, 

Distinguished from the true cap- 
italist, 53-55. 
Present industrial system, 

Its basic principle anarchistic, 9, 
143. 

Has given birth to industrial 
despotism, 143. 

Causes of wrongs under present 
system, 139-159. 
Prices, how fixed under People's 
Consolidated Business Corpo- 
ration, 182-183. 
Productivity of capital, 37-46. 
Profits and profit-taking, 

Marx's definition of profits, 24. 

To whom profits should rightly 
go, 47. 

Profits should go to owner whether 
he works or not, 48-52. 

True definition of profits and 
dividends, 10, 132. 

Profits do not necessarily come 
from robbery of labor, 45. 

No contradiction between profit- 
taking and industry for ser- 
vice, 103, 107. 



Profits and Profit-taking — Con- 
tinued 

" Industry for profit and indus- 
try for service," 106. 

Profits not a necessary evil, 134. 

When profits are wrong, 52. 

Profit-taking not the cause of 
present wrongs, 131-139. 

See also — " Rents," " Interest," 
and " Dividends." 
Proletariate, the, 

Causes of poverty of, 141-142. 



Remedy of present wrongs, 
Fundamental principles, 161. 
Fundamental demands, 173-180. 
Need of a concrete plan, 161-162. 
No artificial remedy possible, 

189-190. 
Must obey law of social evolu- 
tion, 189. 
Rents, — defined, 56. 
Legitimate, 56-57. 
Principle determining amount to 

be paid, 81-83. 
Marxist theory of, fallacious, 79. 
Marxist socialists declare them 

to be wrong, 48. 
Right concrete plan, fundamental 

principles, 
Need of, 161-162. 
First fundamental principle, 162- 

165. 
Second fundamental principle, 

165-167. 
Third fundamental principle, 167- 

169. 
Fourth fundamental principle, 

169-172. 
Right concrete plan, demands, 
First demand of economic science, 

173-176. 
Second demand of economic 

science, 176-179. 



Index 



221 



Right concrete plan, demands — 
Continued 
Third demand of economic 

science, 179-180. 
Fourth demand, 187-188 



Savage, the, — his ignorance of cap- 
ital the cause of his destitu- 
tion, 86. 
Scientific definition of capital, 26. 
Socialism and the socialist party, 
Infected with Marxist economics, 

19. 
Cannot prevail until freed from 
Marxist error, 21, 130. 
Surplus-value of capital as well as 
of labor, 40, 41, 49. 
Denied by socialists, 41. 
The surplus value of capital con- 
stitutes the source of profits, 
41-45. 



Vocational training to be intro- 
duced under new system, 186- 
187. 



W 

Wages, — defined, 10. 

The bulwark, (with dividends), 

of justice, 138. 
How fixed under the People's 

Business Corporation, 181-182. 
Wealth, when viewed as a source 

of income or service is capital, 

27-28. 
Worker, the, 

How plundered under present 

system, 53-54, 101-102. 
How to secure his emancipation, 

98-99. 
Chief causes of poverty of work- 
er, 87-89, 141-142. 



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